Gujarat High Court
Textile Labour Association vs Official on 15 January, 2013
Author: M.R.Shah
Bench: M.R. Shah
TEXTILE LABOUR ASSOCIATION....Appellant(s)V/SOFFICIAL LIQUIDATOR OF NEW RAJPUR MILLS LTD. (IN LQN.) O/OJA/106/2009 CAV JUDGEMNT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD O.J.APPEAL NO. 106 of 2009 In COMPANY APPLICATION NO. 358 of 2008 With O.J.APPEAL NO. 108 of 2009 For Approval and Signature:
HONOURABLE MR.JUSTICE M.R. SHAH Sd/-
and HONOURABLE MR.JUSTICE S.H.VORA Sd/-
=============================================
1.
Whether Reporters of Local Papers may be allowed to see the judgment ?
Yes
2. To be referred to the Reporter or not ?
Yes
3. Whether their Lordships wish to see the fair copy of the judgment ?
No
4. Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
No
5. Whether it is to be circulated to the civil judge ?
No ============================================= TEXTILE LABOUR ASSOCIATION....Appellant(s) Versus OFFICIAL LIQUIDATOR OF NEW RAJPUR MILLS LTD. (IN LQN.) &
4....Opponent(s) ============================================= Appearance:
MR DS VASAVADA, ADVOCATE for the Appellant of OJA No.106 of 2009 MR PC MASTER, ADVOCATE for the Appellant of OJA No.108 of 2009 MS AMEE YAJNIK with MR JS YADAV, ADVOCATE for the Opponent No. 1 MR RM DESAI, ADVOCATE for the Opponent No. 2 OFFICIAL LIQUIDATOR for the Opponent(s) No. 1 RULE SERVED for the Opponent(s) No. 3 - 5 RULE SERVED BY DS for the Opponent(s) No. 2 ============================================= CORAM:
HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 15/01/2013 CAV JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] As common question of law and facts arise in both these Appeals, both these appeals are disposed of by this common judgment and order.
[2.0] OJ Appeal No.106 of 2009 has been preferred by the appellant herein original applicant of Company Application No.358 of 2008 Textile Labour Association (hereinafter referred to as TLA ) challenging the impugned order dated 04.08.2009 passed by the learned Company Court in Company Application No.358 of 2008 by which the learned Company Court has negatived the contention on behalf of the workers that while making payment to them under Section 529A of the Companies Act, 1956 (hereinafter referred to as Act ), along with other secured creditors at pari passu, they shall be entitled to any interest from the date of winding up till the date of sale of the assets of the company in liquidation.
[2.1] OJ Appeal No.108 of 2009 has been preferred by the appellant herein Surat Labour Union challenging the impugned order dated 02.09.2009 passed by the learned single Judge / Company Court in OLR No.70 of 2008 by which a similar prayer made by the appellant herein for and on behalf of the workers of the Company in liquidation (M/s. Sugam Paper & Boards Pvt. Ltd.) has been negatived.
[3.0] Facts leading to the present OJ Appeals in nut-shell are as under:
[3.1] That TLA for and on behalf of the workers of the company in liquidation i.e. New Rajpur Mills Ltd. submitted Company Application No.358 of 2008 for disbursement of the amount out of the amount realized by selling the properties of the company in liquidation. One of the question which was raised before the learned single Judge was about the entitlement of the interest by the workers over the unpaid wages after the date of winding up claiming the status at par with the secured creditor as well as the amount of bonus. The question was also raised by the secured creditors that they are entitled to the interest even for the period after the date of winding up till the sale of the assets of the company in liquidation as per the decree passed by the competent Court / Forum / Tribunal.
[3.2] It was the case on behalf of the respective Workers Union who are in the respective application / OLR that as the claims of the workers are paid pari passu along with the secured creditors under Section 529A of the Act, the workers are also entitled to the interest even for the period after the order of winding up till the sale of the assets of the company in liquidation which is being paid to the secured creditors. That on behalf of the Workers Union, they heavily relied upon Section 529A read with Section 529C of the Act as well as the decision of the Madras High Court in the case of Indian Bank vs. Perumal Raja and Others reported in 1993 Company Cases 787 and the decision of the Andhra Pradesh High Court in the case of Crips Laboratories Ltd. reported in [2008] 145 Comp Cases 357 (AP). On behalf of the Official Liquidator, decision of the Kerala High Court in the case of Federal Bank Ltd. & Ors. vs. Official Liquidator & Anr. reported in [2003] 113 Comp Cases 310 was relied upon. Ultimately the learned Company Court relying upon the decision of the Kerala High Court in the case of Federal Bank Ltd. (Supra) and agreeing with the said decision, came to the following conclusions:
A. If after the satisfaction of the debt under Section 529A, any surplus/balance amount is available, the secured creditors would be entitled to the remaining share, if paid less on account of the workers claim to the extent of the money realized from such property, which was as the security of such secured creditor. But, such would be restricted to the contractual interest up to the date of winding up.
B. If the secured creditor is holding the decree for the interest as per the contractual rate, even for the period later to the date of winding up, he would be entitled to the interest at the rate of 4% p.a. from the date of winding up, until the property is sold from the available surplus/balance fund realised from such security, prior to the payment attributable to the preferential creditors under Section 530 of the Act. If the secured creditors are not holding the decree, for any interest later to the date of winding up, their claim is not required to be considered for interest in such category.
C. The remaining unpaid amount of interest as per the decree of the secured creditor is to be considered for payment, if surplus amount remains after satisfying the debt of all other creditors.
D. The workers would not be entitled to interest at par with the interest with the secured creditor holding the decree for contractual interest for the period after the date of winding up. The claim of the workers, if any outstanding, after payment under Section 529A of the Act would fall in the category of unsecured creditor.
E. The claim of the application of Company Application No. 185/09 be treated as falling under Section 530 of the Act and the OL shall be at the liberty to get the said claim verified, if not verified, with the help of the Chartered Accountant and such claim shall be considered as per the statutory priority and as and when fund is available.
Similar view has been expressed by the learned single Judge/Company Court in OLR No.70 of 2008 arising out of which OJ Appeal No.108 of 2009 has been preferred by the Workers Union for and on behalf of the workers of company in liquidation i.e. Sugam Paper & Boards Pvt. Ltd.
[3.3] Feeling aggrieved and dissatisfied with the impugned orders passed by the learned Company Court holding that the workers shall not be entitled to the interest at par with the secured creditors while making them payment under Section 529A of the Act and holding that the claim of the workers, if any outstanding, after payment under Section 529A of the Act would fall in the category of unsecured creditor, the appellants herein Workers Union have preferred the present OJ Appeals. In OJ Appeal No.106 of 2009.
[3.4] A further question which is posed for consideration is whether the workmen are entitled to receive the bonus which is a statutory minimum requirement under the Payment of Bonus Act, 1965 and whether the bonus falls within the head of statutory dues under Section 530 of the Act?
[4.0] Shri D.S. Vasavada, learned advocate has appeared on behalf of the appellant of OJ Appeal No.106 of 2009 and Shri P.C. Master, learned advocate has appeared on behalf of the Workers Union appellant in OJ Appeal No.108 of 2009.
[4.1] Shri Vasavada, learned advocate appearing on behalf of the appellant of OJ Appeal No.106 of 2009 TLA has vehemently submitted that by virtue of the amendment in the Act in September, 1985, the dues of the workmen are treated as secured and at par with the secured creditors. It is submitted that the aforesaid is very clear by reading the language of Section 529A and 529 of the Act. In support of his above submissions, he has also relied upon the Budget Speech of the Finance Minister while introducing the Bill in the Parliament (while amending Section 529 and inserting 529A in the Act). It is submitted that Section 529A of the Act was introduced so that the legitimate dues of the workers run pari passu with secured creditors in the event of the closure of the company and even above the dues of the Government. It is submitted by Shri Vasavada, learned advocate appearing on behalf of the TLA that if we read the statement of objects with the language of Section 529 and 529A of the Act, then it becomes evident that the intent of the legislature is to adequately and satisfactorily compensate the workers for attributing their labour and therefore, the dues of the workmen are treated pari passu with dues of the secured creditors. It is submitted that necessary inference is that the term pari passu has a very wide sweep and it does connote that the secured creditors and the workers are to be treated at par in all aspects. It is submitted that the Andhra Pradesh High Court in the case of Crips Laboratories (Supra), has interpreted the term pari passu incorporated in the very said sections and has held that for all practical purposes, a workman is treated as a co-charge holder along with the secured creditors and would, therefore, be entitled to claim the same rate of interest on their dues from the assets of the company in liquidation as has been contracted to by the secured creditors which in the present case is 15% per annum. It is submitted that however it may be clarified that as the learned Company Judge has reduced the rate of interest to be paid to the secured creditors at 4% per annum in consonance with the Company Court Rule 179 and therefore, the workmen have no objection if this interest is awarded.
[4.2] Shri Vasavada, learned advocate appearing on behalf of TLA has also relied upon the decision of the Hon ble Supreme Court in the case of Textile Labour Association & Anr. vs. Official Liquidator & Ors. reported in 2004(3) GLH 416 (Para 8) in support of his above submissions.
[4.3] Relying upon the above decisions of Hon ble Supreme Court and Andhra Pradesh High Court, it is submitted by Shri Vasavada, learned advocate appearing on behalf of the TLA that it is not desirable and permissible to segregate the interest which is also accompanied with the principal amount. It is submitted that legislature has intended to treat the workers with equal treatment in all aspects and for all practical purposes including the purpose of payment of interest.
[4.4] It is submitted by Shri Vasavada, learned advocate appearing on behalf of TLA that the learned Company Judge has taken a view which is absolutely contrary to the statutory provisions and the aforesaid decision of the Hon ble Supreme Court. It is submitted that apart from the aforesaid, the learned Company Judge has placed sole reliance on the Company Court Rule 179. It is submitted that the Company Court Rule 179 was inserted prior to 1985 and the amendment in the Act was brought on Statute Book in 1985 and Section 529A was inserted in 1985. It is submitted that therefore Company Court Rule 179 should be interpreted in consonance with the object of the legislation and therefore, the learned Company Judge has erred in holding that there is no provision in the Act which provides the payment of interest to the workmen. It is submitted that when language of the section is clear, it is not necessary to refer to the dictionary meaning of the term pari passu . With respect to the meaning of the word pari passu, Shri Vasavada, learned advocate appearing on behalf of the TLA has relied upon the decision in the case of Karnataka State Industrial Investment and Development Corporation Ltd. vs. Shivmoni Steel Tubes Limited & Ors.
reported in (1998) 94 Com Case 1 as well as the Oxford Dictionary and the Law Lexicon. It is submitted that as per the above, pari passu means with equal speed. Simultaneously and equally or with equal step; with simultaneous progress . It is submitted that therefore, if we construe the meaning of the term pari passu , it indicates two aspects viz. simultaneous and equal. It is submitted that term pari passu is to be further construed as equal in all aspects. Thus, equal in the payment of principal dues as well as equal in payment of interest. It is submitted that this is the real meaning of the term pari passu and the underlying object of Section 529 and 529A of the Act. It is submitted that therefore, whatever interest the secured creditor is entitled to receive under the decree passed by the competent Court and as per the contract or as per Company Court Rules, the workmen are equally entitled to receive the same line of treatment in the payment of interest also. It is submitted that no other meaning can be given to the term pari passu as has been tried to be given by the learned Company Judge. Therefore, it is submitted that the learned Company Judge has patently and materially erred in interpreting and appreciating the underlying object of Section 529 and 529A of the Act.
[4.5] Now, so far as the payment of bonus to the workers while considering the claim of the workmen, Shri Vasavada, learned advocate appearing on behalf of TLA has stated that under Section 10 of the Payment of Bonus Act, 1965, every employer is under a statutory obligation to pay minimum bonus at 8.33%. Thus, the bonus being a right accrued to the employees under the statute, it is statutory dues and therefore, it is the dues under the statute and therefore, it is the entitlement of the employee/workman under Section 530 of the Act.
[4.6] It is submitted that simultaneously the workers are required to be paid a notice pay as required to be paid under Section 25 of the Industrial Disputes Act, 1947 and therefore, the notice pay which is required to be paid under Section 25 of the Industrial Disputes Act, 1947 also falls within the category of statutory dues under Section 530 of the Act.
Making above submissions and relying upon above decisions, it is requested to allow the present OJ Appeal and direct the OL to pay the interest at least at the rate of 4% per annum on the dues of the workmen, for the period after winding up till the assets of the company is sold, at par with secured creditors and which is paid to the secured creditors.
[4.7] Shri P.C. Master, learned advocate appearing on behalf of the appellant of OJ Appeal No.108 of 2009 Surat Labour Union for and on behalf of the workers of the company in liquidation i.e. Sugam Paper & Boards Pvt. Ltd. has also made the similar submissions and has submitted that the workmen are entitled to the interest on their dues which is being paid to the secured creditors and at par with the secured creditors.
[5.0] Both these appeals are opposed by Ms. Amee Yajnik, learned advocate and Shri J.S. Yadav, learned advocate appearing on behalf of the Official Liquidator as well as the learned advocates appearing on behalf of some of the secured creditors. It is submitted that as such the dues of the workmen are unsecured, however, by virtue of Section 529A of the Act, they are entitled to receive their dues pari passu along with the secured creditors. It is submitted that the workers are entitled to pari passu along with the secured creditors in respect to payment and not with respect to the claim/dues. It is submitted that therefore the learned Company Court has not committed any error and/or illegality in denying the interest to the workmen at par with secured creditors. It is submitted that as such the learned Company Court has rightly followed the decision of the Kerala High Court in the case of Federal Bank Ltd. (Supra).
[5.1] Now, so far as the reliance placed upon the decision of the Hon ble Supreme Court in the case of Textile Labour Association & Anr. (Supra) and the decision of the Andhra Pradesh High Court in the case of Crips Laboratories Ltd. (Supra) by the learned advocates appearing on behalf of the respective appellants, it is submitted that in none of the decisions it is held that the workers would be entitled to the same interest/s on their dues which is being paid to the secured creditors. It is submitted that in none of the cases there was a direct issue with respect to payment of interest to the workers at par with the secured creditors. It is submitted that even under Section 529A of the Act which provides for dues of the workmen, does not provide the interest. It is submitted that therefore, the learned Judge has not committed any error and/or illegality and has rightly held that the workmen are not entitled to the interest on their dues at par with the secured creditors.
[5.2] Now, so far as the payment of bonus and the notice pay as required to be paid under Section 25 of the Industrial Disputes Act, 1947 while considering the dues of the workmen is concerned, it is submitted that none of the aforesaid claims fall within the definition of workers dues as provided under Section 529 of the Act and therefore, the workers shall not be entitled to the bonus and/or even the notice pay as provided under Section 25 of the Industrial Disputes Act, 1947 while considering their dues or payment under Section 529A of the Act. Learned advocate appearing on behalf of the OL has also relied upon the recent decision of the Hon ble Supreme Court in the case of Textile Labour Association & Anr. (Supra).
Making above submissions, it is requested to dismiss the present OJ Appeals.
[6.0] Heard learned advocates appearing on behalf of respective parties at length. The short question which is posed for the consideration of this Court is whether while making the payment to the workmen pari passu along with the secured creditors under Section 529A of the Act, the workers would be entitled to interest at par with the secured creditors? Whether the workmen are entitled to receive the bonus and whether the bonus falls within the head of statutory dues under Section 530 of the Act and whether the notice pay which is required to be paid under Section 25 of the Industrial Disputes Act, 1947 also fall within the category of statutory dues under Section 530 of the Act?
[6.1] Re:
Interest Now, so far as the first question whether the workers are entitled to the interest at par with the secured creditors while making the payment under Section 529A of the Act is concerned, it is required to be noted that as such the dues of the workers are as such unsecured debt, however, by virtue of Section 529A of the Act, they are entitled to receive their dues pari passu along with secured creditors. Thus, the workers would be entitled to their dues at par with the secured creditor so far as the payment is concerned and not with respect to the dues/claims. Even considering the dictionary meaning of the word pari passu as per the Law Lexicon, pari passu means with equal step; with simultaneous progress; at equal rate or pace and/or equally . Even the workers dues are defined under Section 529 of the Act. Therefore, what is provided under Section 529A of the Act would be that at the time of disbursement/payment of the amount out of the amount realized by selling the properties of company in liquidation, the secured creditors and the workers would be entitled to the payment equally and/or at equal rate. By providing the payment at pari passu with the secured creditors as provided under Section 529A of the Act, what is provided is payment and not with respect to the same or similar dues. Under the circumstances, the contention on behalf of the workers that they are also entitled to the interest at par with the secured creditors and/or which is being paid to the secured creditors while making them payment under Section 529A of the Act, cannot be accepted. The learned single Judge has rightly agreed with the decision of the Kerala High Court in the case of Federal Bank Limited (Supra).
[6.2] Now, so far as the reliance placed upon the decision of the Andhra Pradesh High Court in the case of Crips Laboratories Ltd. (Supra) is concerned, like the learned Company Court, this Court is also not in agreement with the view taken by the Andhra Pradesh High Court. At the outset it is required to be noted that as such there was no similar issue before the Andhra Pradesh High Court. This Court is not in agreement with the view taken by the Andhra Pradesh High Court that for all practical purposes a workman is treated as a co-charge holder along with the secured creditors and would, therefore, be entitled to claim the same right of interest from the assets of the Company under liquidation as has been contracted to by the secured creditors.
[6.3] Now, so far as the reliance placed upon the decision of the Hon ble Supreme Court in the case of Federal Bank Limited (Supra) is concerned, considering the said decision, it appears that there was no controversy / issue before the Hon ble Supreme Court with respect to the interest claimed by the workers at par with the secured creditors. Under the circumstances, the aforesaid decision of the Hon ble Supreme Court would not be of any assistance to the appellants.
[6.4] Under the circumstances, it is held that while making the payment under Section 529A of the Act, pari passu along with the secured creditors, the workers would not be entitled to the interest on their dues at par with the secured creditors and/or which is paid to the secured creditors.
[6.5] Now, so far as the submission on behalf of the workers that even the bonus under the Payment of Bonus Act, 1965 and the notice pay which is required to be paid under Section 25 of the Industrial Disputes Act, 1947 also falls within the head of statutory dues under Section 530 of the Act is concerned, the same has no substance.
[6.6] Now, so far as the prayer of the Worker s Union to pay the bonus due and payable under the Payment of Bonus Act, 1965 while making the payment pari passu with the secured creditors, paid under Section 529A of the Act is concerned, the aforesaid cannot be accepted. It is to be noted that as per Section 529A of the Act, the workers are entitled to their dues pari passu along with the secured creditors. Worker s dues are defined under Section 529(3)(b) of the Act, which reads as under:
529(3)(b) "workmen's dues", in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:-
(i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947);
(ii) all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution;
(iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such contract with insurers as is mentioned in section 14 the Workmen's Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company;
(iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company;
As held by the Hon ble Supreme Court in the case of Hamdard (Wakf) Laboratories vs. Dy. Labour Commissioner and Ors. reported in (2007)5 SCC 281, wages does not include the bonus. The Hon ble Supreme Court in the said decision has observed and held in paras 21, 26, 28 and 29 as under:
21. Definition of 'wages' within the meaning of the Act does not include "bonus".
It, however, includes allowance. Payment of Bonus Act also excludes bonus for the purpose of calculating the amount of bonus to be determined in terms of Section 10 thereof.
26. Bonus either in its ordinary meaning or statutory ones would not include wages.
28. In Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur [(1955) 1 SCR 991], this Court held:
"It is therefore clear that the claim for bonus can be made by the employees only if as a result of the joint contribution of capital and labour the industrial concern has earned profits. If in any particular year the working of the industrial concern has resulted in loss there is no basis nor justification for a demand for bonus. Bonus is not a deferred wage. Because if it were so it would necessarily rank for precedence before dividends. The dividends can only be paid out of profits and unless and until profits are made no occasion or question can also arise for distribution of any sum as bonus amongst the employees. If the industrial concern has resulted in a trading loss, there would be no profits of the particular year available for distribution of dividends, much less could the employees claim the distribution of bonus during that year."
29. Bonus may be a deferred wage but the same must be construed in a different context. When used in the context of 'backwages' and that too 50% of it, the same would not include backwages. It is expected that had the Labour Court intended to include the same, he would have explicitly said so. Even now, under the Payment of Wages Act, bonus does not come within the purview of wages. The decision was rendered when Payment of Bonus Act had not been enacted.
Considering the above, prayer of the worker s union to pay the bonus along with the wages for the interregnum period, cannot be accepted.
[7.0] In view of the above and for the reasons stated above, both the OJ Appeals fail and the same deserve to be dismissed and are, accordingly, dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs.
Sd/-
(M.R.SHAH, J.) Sd/-
(S.H.VORA, J.) Ajay Page 15 of 15