Karnataka High Court
The General Secretary vs The Deputy Commissioner on 16 December, 2009
Author: B.V.Nagarathna
Bench: B.V.Nagarathna
IN THE HIGH COURT OF' KARNATAKA AT BANGALORE
DATED THIS THE 16TH DAY OF DECEMBER, 2QO§'E._V
PRESENT
THE HONBLE MRJUSTICE V.GOPALA.{;}OW"ITE\«. 3 V' A
AND
THE HONBLE MRSJJSTICEE,_V.VNAGARATHNA'j V
w.A.NO. 1382'/$509 (L-R'E.Sj' A
BETWEEN:
THE GENERALE3.ECRE.'1'1XRY" ; TV
MYSORE DIV1S?QN-- INDUSTRIAL .. _
WORKERS GENERALUNIGN, f,
NO2682, 2151" CEROSS, bME;DER_A.KE3RiV.--
MANANDAV.ADI§RAOD,'--. ~ "
MYSORE5-'ZQ'j;Q04':fi-1 '
. . APPELLANT
(By Sri: Iu{OBVEENAI§flxYAN2X«S;WAMY FOR
M C NARASIMHAN ASSOCIATES}
TLIE DEPUTY COMMISSIONER
' MYSORE DISTRECT.
THE ASST. GENERA{,MA1\2'AGER
KARNATAKA STATE FINANCIAL
CORPORATION, SR1 HARSHA ROAD,
MYSORE.
3 KARNATAKA INDUSTRIAL AREA
DEVELOPMENT BOARD 3'
xx'
A 2 'FT7
11 FLOOR, KRS ROAD, MYSORE
BY ITS GENERAL MANAGER.
RESPONB-ENTS
(By Sri: IE3 RUDRA GOWDA, ADV. FOR R2.
SR1. P V CHANDRA SHEKAR FOR R3,
SMT VIJAYA A D, AGA FOR R1)
WRIT APPEAL FILED U/sv-4:0?
HIGH COURT ACT PRAYING TO '=,smj.Ass1m:'
PASSED IN THE WRIT PE'I'I'i"IVOI"J 'No.3sso./20'o9~..V'&._V
4527/2009 DATED 6.3.2009,' "
This WA having. been and rese'rve.d..for Orders
on this day, NAGARAT'ijIN.4\ J deilivieredvvtiiie foiiowing:--
This ai5f'33'eaI"*is"-fiietfagainst the order passed in
W_.P.No;38530/2:Oo§3~.and_L'"A/iI§,'No.4527/2009 dated 6.3.2009
by the 1é'a:_;%:edds:ng:¢" 'elutidge by the petitioner who was
V. y_ un_s{:..ecessfuI in 1;'1'1f1__7s2\TI'it petition.
.21 to the petitioner, the petitioner is a trade
union" registered under the Trade Unions Act and has been
to in operation with regard to some of the industries in Mysore
Mysore Pane} & Boards Private Limited is a
"company and the workmen of the said company are
members of the appellant trade union. According to them
the said factory closed its manufacturing activities in
3?!»
January 2002 at which point of time there were about 83
workmen who are all represented by the appellants.
Consequent upon the closure of the factory at _
Industrial Area closure compensation, gratu-it.y_:j.bonus and ~ .. it
wages of the workers were not l<Ie'11cvepA_'Ht1;1e
appe1lant/ union authorized; by the lhfworkmen tiled; "snf~_
application under Section 33--'C[o»l:Vy:lV'of Disputes
Act for revenue recovery unpaid
statutory dues to be assets of the
company as ofgiangd .. adjudication the
Deputy a revenue recovery
certificate" «'._'4';'3:§2005, for a sum of
Rs.4,7Vi;7s1§/4 dated 30.8.2005, for a sum of
Rs. is,6sf5s_Vs/i~ and L-.5} ssder dated 13.9.2005, for a sum of
'_ Rs.V_»»"}i:,7s_p;69V6/-- s'n.:i.._th.s total wages payable from 21.11.2001
'to"30.1,20(32«t"b.eing Rs. 5,533,141/~, the total outstanding
'dues V:}=l§s.35,OO,2O3/~. The Deputy Labour
'V Commis'sioner pursuant to the revenue recovery certificate
it ligyissiuepd him addressed a letter with check list to the
reslpondent No.1 to take necessary action to recover the
it "amount mentioned as arrears of land revenue and to use the
proceeds to liquidate the claims of the workmen. Thereafter
the Tahsiidar, Nanjangud Taluk addressed a letter dated
has
__ 4 __
8.52006 to respondent No.1 stating therein that since the
KIADB had sealed the factory premises and did not know the whereabouts of the concerned Officers, it was not to recover the dues payable to the workmen. Onqthleif the said letter of the Tahsildar, res_pondent_--l\lo.'1' 2' letter dated 8.6.2006 to the Deputy Region--II, Bangalore expressing inability recover; amount in View of the factoryéffbeirigy sealed, respondent N 0.4 and the whereabou._ts of t_he;_cor1cerned_ officers not being known. Subsequently... p--eti.tio'n'erf"addressed a letter dated 28.8.2€._)v08f:;:j>to_ A1.\loV.l"'referring the Various revenue' recoyery ciejrtififcates 1s.'sue-d' by the competent Labour Coxnrnissionel' _ V' 8' furnishing the addresses of respondentablos. 3 -8: A4-_ for. further action. *~ '=..7\[1V"'1~iE.',I'i..._'fl}i_1_'1gS stood thus, respondent No.3 issued a H pauper published in 'Vijaya Karnataka' daily Kannada' newspaper dated 9.12.2008 proposing auction of if " 1 KIvAI?BvVland in plot Sy.No.7{A--B) measuring 4 acres 3 guntas ltogelther with industrial shed, office building, canteen guest 8 "house etc and the proposed auction was held on 17.12.2008 and according to the appellant the said auction has taken place. That, respondent No.3 has realized the money from fig.
the sale of the assets of the factory and is proposing to appropriate the entire amount to itself. According to the appellants, the action of respondent No.3 appropriatingthe entire amount of Rs.24,00,000/-- realized from;"tlieVj_~sale ;_.o1"« _ machinery and other assets would mean -, would be left high and try without :vrelie1f}_'d:es~p'itel certificates of recovery obtained by th-emvand therefore, it aggrieved by the said decisio'nV:'they liaVe"tiled;: the writ petition before this cour"t...y_p V l l
4. After se_rvi'ee':-of notice petition, the second respondent'-apipearied' counsel and stated that since the had' 1efi:I]m.¢neyu:g" the company and on account of default it power under Section 29 of the V. g_ Stav_t'e7,F'inancial Corporation Act and therefore, its action was 'inl'accorrdancefl"Wi_th law. Respondent No.3 appeared through itsy.counselV.'fa:n:dstated that the shed belongs to the KIADB
-V andhllllwzhlat auctioned was only lease hold rights and u it " and the title of the shed remains with the Board. Learned single Judge while taking note of the said submissions held that since the auction is held and KSFC would realize the sale proceeds towards its dues, if the 5x workmen are entitled to recover the amount, then it is not possible to decide as to who would be entitled for first recovery as these are matters which require 'proper adjudication. The workmen can exercise the power. instance of the appellant/ union to create a charge 'to'recoir'er__ the dues towards the workmen from the "sale--pVro.9?_édsg of auction of lease hold rights and hence held that'_tAthere ,;fll(')7.p purpose in stalling the a11ctio'n_o'r interi'erir1g.":with the said process and accordinglyrgdisposed the writlpetition in the above terms. Being 'said order, the petitioner haspvpreferredgAthis_:appe'al;_g_'V ' I
6. We have counsel for the appellant and learnetixcovtinsel respondent Nos.2 & 3. Learned'vcounsel on both sides have re--iterated the which have been made before the learned single ~g Judge "vanhdf the appellants counsel has stated that V. Conspidering the fact that the workmen's dues are statutory in hature their dues have a priority over all other dues. The it '"l'earr1ed single Judge ought to have allowed the writ petition and directed that there dues be satisfied at the first instance and thereafter the KSFC could have got its dues satisfied. *7?
V 8 V for millions of peasants and workers that India shall be a socialist democratic republic where social and economic justice will inform all institutions of national life and there will be equality of status and opportunity for all and_¥exfery endeavour shall be made to promote fraternity dignity of the individual. Every one is assure.d_":und'er pg 14 equaliw before the law and equalppérotefction and implicit in this provision is «the"e«guaranIteeV of remuneration for men and won'ie_n~ for same 'work for Work of a similar nature. 'I'raffic_ in_«"humari Vbeings andlbegar and other similar forms of forcedglalbour are proh_i;bited under Art. 23 ma;1idates'-that'_"no'"child below the age of 14 may b:e_gernployeVdV:'irJ.ig or mine or engaged in any other hazardous 'employment. These two Articles came up for"'3:2ogi_structiori"«before this Court in Peoples Union for ' lV3Vernocratic«vt1«C:2'i'ghts V. Union of India, decided on 18113 Sept, "is;§is2 :V{re'p;eriee1 in AIR 1982 sc 1473). Article 38 imposes obligagtionon the State, albeit unenforceable in a Court of ., la'w,.to vlllstrioe to promote the welfare of the people by securing 'aridfproteciing as effectively as it may a social order in which "social justice shall inform all the institutions of the national life". This is followed by Article 39 which inter aiia obliges the State to direct its policy towards securing that the 22,.
N. 9 __ Citizens, men and women equally have the right to an adequate means of livelihood, the ownership and control of the material resources of the community are so diistrributed as best to subserve the common good, the opci:atiAon.i'g:off the economic system does not result in the-'coneentratioyn '-Of.' wealth and means of production to the ..corrimon"'detrizneiit, there is equal pay for equalV'vv'o.rk for-both n;enA..fan,dHwlome1::* and the health and strength ofavvorkers;"rnen and women and the tender age of ~n_'o.t'"abused and citizens are not forced by economic enter avocations unsuited to Jr'll'li€"':StE1t€ is directed by Article"4"1i' toyieffedive provision, Within the limits of its econom_ic'capa.cityfanddevelopment, for securing the right to work andlArtielel42 A1'=et;'u.ires the State to make provision for seciiring just and ____ humane conditions of work and for ' materr1_it'~r 'relivef. Article 43 provides that the State shall 'endeaVourf----toi= secure, by suitable legislation or economic organisation or in any other way, a living Wage, conditions of "work ensuring decent standard of life and full enjoyment of lieisure and social and cultural opportunities. Then follows it "Article 43~A which is intended to heraid industrial democracy and in the words of Krishna iyer, J. mark "the end of industrial bounded labour". That Article says that the /5' MlO_ State shall take steps, by suitable legislation or in any other Way, to secure the participation of workers in the management of undertakings, establishments orip"."o.ther organisations engaged in any industry. The conpsjLitu"t-tonal mandate is therefore clear and undoubted' management of the enterprise shouldnot be lieftentirely the hands of the suppliers of capita'lVb:ut the iivorkers also be entitled to participate
11. in this appeal relationship of the workers *-"Jiz--a--vi2""th:e The workers or workmen'""are"j;pnot*fi.;meregvendors'"of toil, they are not a marketlablegl purchased by the owners of capital. are pro.d'ue,ers of wealth as much as capital. , g_ Acouéigdivxfig to "Lor_c_;1s.1v1ip Bhagawati J, the workmen supply ~labo_ur which capital would be impotent and they 'least, equal partners with capital in the enterprise. .' fact the changed concept of a company has expressed in the case of Panchamahal Steel Ltd. Vs. tfnivérsal Steel Traders reported in (1976) 46 Company it "Cases 706 where it has been said that new problems call for a fresh approach and in ascertaining or devising a fresh approach, the objective for which the company is formed ,2/-4, _11a may provide a guideline for the direction to be taken. According to Prof. Be Wool of Belgium, the companyphhlhas a three fold reality -- economic, human and pL1b1iC_.r.*r". its own internal logic. The reality of the com'pany::_isvf'much_p if broader than that of an association of lcapitalyit. ihumaii working community that performs ha__collectivev_activon common good.
12. in fact in the of Worlcers' Union Vs. P.R.RamakriAs_hnan,AAI]§t Supreme Court by a majority%_.:du;rigmer;t l'ii§..,1;OW accepted on all hands that capitalist countries that the foday social scientists and thinkers regard "as a living, vital and dynamic, socia'1--voprganVis:nlWith and deep rooted affiliations with f * res'tff"ofVVthe community in which it functions. It would be upon it as something belonging to the S1A"i~34.1'('.'i1()-}d:en1":",*3.A' There is another equally, if not more, important factor of production and that is labour. Then there are the financial institutions and depositors, Who provide the additional finance required for production and lastly, there are the consumers and the rest of the members of the community who are vitally interested in the product manufactured in the concern. A company, according to the fa.
nl2__ new socio--economic thinking, is a social institution having duties and responsibilities towards the community it functions. The Supreme Court further went onto _ in the present times when the entire conceptof has ~« .. changed and it has been transformed economic institution in which_capit'al and lapbiourl arel;bo'th'"xp equal partners, possibly withlll1eVav'y_weightage'l inbifavour of labour, and the interestof as also the general welfare anti if community constitute a con_AsicierationT.'bvll the Welfare of workmen " a company and law must move adopting itself to the fasltgcéhaéngingl lag behind.
13. In the same _clas_e Lordship Chinnappa Reddy J, haspegcpressed that theépublic interest element is now quite a ,pre_domiAriant'factor as far as company is concerned and even lllinfthe Cofripaniels Act itself there are several provisions in the"*saicl. which take note of the element of public _"i;1terestl."*' ll There are a host of other legislations involving enipl-olyment and welfare of labour to which the management = "of: the companies are subject. He went on to say that "the V transformation of a company's characterfrom private to public 3,, rrvvn]-3rrvvn is going on right before our eyes even as the institution of private property is also losing its diathesis. It is in thlslc_oln.text of ferment and development that we must _ problem before He has further quoted-l§roVf."-Cwowerls2.
"The Principles of Modem Company as":
vexed question of the relations hip between the tgemplogteesj , the company which employs ltlten: ts, ctlclomtnant theme in the current debate "overfrom company to labour law".
14. The VthAer.--c011text of the right of the worl{n1c--nu;to be:fl;1ear'cl,in up proceedings initiated under the Supreme Court by a majority of 3: 2 heldthatlvcro1*i;m'er£V have a right to be heard in the casg.§«pf Aiuppetttions being filed by companies either ~volv.nta.rily creditors and third parties. After the 'pro11.o'unCe.in.en;tof the Supreme Court in the said ease the
-- Cornpa1iies.'".£VXct was amended and Section 530 which it cgpertainslllto preferential payment was made more emphatic _' amendments made by including or inserting Section '"529--A which deals with over riding preferential payments while Section 529 deals with application of insolvency rules 9% W14"
in winding up of insolvent companies. The said sections are extracted here for immediate reference:
529. {1} In the winding up of an company, the same rules shall prevail and' --1- "
observed with regard to «A
(a) debts provable;
{b} the valuation of annuities j"utu.re*- it contingent liabilities; and A .
{c} the respective nghts.of_secur'ed'and uriseeured creditors; .._ as are in force for the being under' the law of insolvency with respectto the estates of V persons adjudged insolvent:-._ _ V --. .
[Provided §*that. the sec_urii'--y ofmevery secured creditor sha'll"be ,toKbe» subject to a pan' passu..vcha:'rge in favour of the workmen to the extent 'of the wo.rkmen's""portion therein, and, 'where asecu'red*cred_itor,j instead of relinquishing his rsecuritydand» preving his debt, opts to realise his.._securi'ty.. ' , * the ltquidator shall be entitled to represent the » workmen __enj'"orce such charge;
(}':5)* any amount realised by the liquidator by way of'ergforcerTIent of such charge shall be applied rateably. for the discharge of workrnen's dues; {c}. much of the debt due to such secured creditor as could not be realised by him by virtue "of the foregoing provisions of this proviso or the amount of the workmen's portion in his security, H whichever is less, shall rank part passu with the ' workmen'.s dues for the purposes of section 529A,] {2} All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against 2% W15"
the company as they respectively are entitled to make by virtue of this section :
[Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be lio.blle.,,_ to pay [his portion of] the expenses incurred the liquidator ( including a provisional liquitlaton. --1- any) for the preservation of the security b'efore=its" M realization by the secured creditor. ] [Explanatioru For the purposes of-thi*3 proviso, the-,__ portion of expenses incurred by the liquielator fo"r,_"~ the preservation of a security which the"securedV;
creditor shall be liable shall beythe whole' of the expenses less an a.r_nou_nt whichl 'bears to such expenses the same b' ' -- proportion' V v '4 the workmen's portionin ' , . ~ [(3] For the purposes of y:secti»o_n..V section 529A and section 530, ,_ h" vb ' .
{a} "u>ork:n_en", in re-la--tion to} a company, means vthe'i'ernployees of,t'he company, being workmen 'within the rr_ieaning"of the Industrial Disputes Act, 1947 I1 4 or.294k:7,2;
(bj l"wor'kmen's._dues", in relation to a company, 5' 'means theagrgregate of the following sums due from the company to its workmen, namely :~ T' it all wages or salary including wages ' for time or piece work and salary earned whollly or in part y way of commission of any workman, in respect of services rendered to the a 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; it ..15..
(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 suchaa-._ contract with insurers as in mentioned in section' . V 14 of the Workmen's Compensation Act, -3' of 1923), rights capable of being transfc.r__red'-to" M and vested in the workman, all amoun'is..c:iue"'in'-A respect of any cornpensation "org I.iab.i'lity .for"Wr , compensation under the said=.,Act,-inyrespect of the-..__. 3 A death or disablement of any workmanpof. the, ' COlTlpCU'ly,'
(iv) all sums due to any _workma_n"frorn a provident fund, a,-pensionfund, _gTCliLLi'fy'j'Li~Fid or any other fund for'«--the--'_ welfarerofthe workmen, maintained by the 'con':pan,g;:.v ' {C} "work_men's fportio,n"_, relation to the security" ojfiany secured creditor...of a company, means the }:1,rrgou'i1.t wh.ich*..bears to the value of the securtiy.;;:he same piiopoiiition l'as"the amount of the U--e?0--FlCTfi8?i'lS'ii;u,€5 ~<i€5.U'S A10-the. aggregate of - (Uh it the of dues; and {ii} "'--,the Va-moiints" of the debts due to the ' ' ''secured'-cred'itors.
. value of security creditor of a company is 1§s;»1,4o_o',Vooo. The total amount of the workmen's isrE?_s,1,00,000. The amount of the debts A dueffrom the company to its secured creditors is R-3,0,G,OOO. The aggregate of the amount of H workrnen's dues and of gthe amounts of debts due to secured creditors is Rs/£00,000. The workrnen's portion of the security is, therefore, onefourth of the value of the security, that is Rs. 25, 000. ] [overriding preferential payments.
529A. (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the windin up of a company -- fix, ...]_"]W
(a) workmens dues: and {b) debts due to secured creditors to the extent such debts rank under clause {c] of the proviso u sub--section (1) of section 529 part pClSSl:l""iL?,llTl1.__:' _.__ such dues, V shall be paid in priority to all other debts, V_ __ {2} The debts payable under Clause' (afand 'clause A
(b) of subsection (1) shall be"-paidl "in fu'll,"unless_""~.._ "
the assets are insufficient to rneetthente .i--n.w'hiCh ' case they shall abate in equal proportions, I Preferential payments...
530. {1} In a "winding{.y'up;"--jsulject to the provisions of section'l-529251', ] ithe~re"sh~all_'..be paid in priority to all oth€r""delits 4 . " "
{a} all revenues, takes...7cesses._'and fated due from the co.n§pan_iy to the Central a State Government or to aflocalalt relevant date as define.d"ir1:'clausie {C} "of'subwseiction (8), and having be"c'om.eL; due} "and."'paya'ble' within the twelve months' 'n"e:;:t_ before that date:
{including wages payable for time-or piece work and salary earned wholly "or in part' by" way of commission] of any en'1ployee,""in.._.respect of services rendered to the and due for a period not exceeding four ~rnonths"within the twelve months next before if relevant date ["'**], subject to the limit ' speoifield in subsection (2);
ye (l"c,l all accrued holiday remuneration becoming payable to any employee, 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; (cl) unless the company is being wound up voluntarily merely for the purposes of reconstruction or amalgamation with another company, all amounts due, in respect of contributions payable during the twelve months next before the relevant date, by the company as fr WEBW the employer of any persons, inder the Employees' State Insurance Act, 1948 [34 of 1948}, or any other law for the time being in force;
{e} unless the company is being wour;id'«.fup__y' ;_. voluntarily merely for the purposes reconstruction or of amalgamation w_i.thV_another._ company, or unless the cornpariy haswat' commencement of the winding up,' untder such, contract with insurers as is men--t_io'nedl'in'sectipnl._,.,,.j:lAl1lA 14 of the Workmen's Compensation Act..7j923 (8 of 1923}, rights capable_"o_.f beingi1'ansferred«»V to' and vested in the workman, all amount-3' due in respect of any __ compen_sa'aon.._y or liabilityf for compensation under the said Act "in respect of the death or disablement *.ofl£.,any"--,errtployee of the company: i 0') all due gtof any fernplfoyee from a provident ~ape'nsionfu*nd, allgratuity fund or any iyother _forffthe* 1_1V).elfare'.-of the employees, main tainediby company;
',(g) theAVl'e;>;3flerises<of___any investigation held in pursuance c_zf.sec.tionyy25'35 or 23 7, in so far as they are_payab'le by the «coinpany.
1 ' "{2} The sumto which priority is to be given under clause (b) l'of.su}:~~section (1), shall not, in the case of any. one claimant, [exceed such sum as may be
-noéij'ied'vby the Central Government in the Official {3} _lA4jlvVhere any compensation under the .. Workmen's Compensation Act, 1923 (8 of1923} is a__ "weekly payment, the amount due in respect thereof shall, for the purposes of clause (e) of sub- section (1), be taken to be the amount of the lumpsum for which the weekly payment could, if redeemable, be redeemed ij" the employer made an application for that purpose under the said Act.
(4) Where any payment has been made to any employee of a company,-
(i) on account of wages or salary; or /6:
/4' M19."
(ii) to him, or in the case of his death, to any other person in his right, on account of accrued holiday remuneration, out of money advanced by some person for purpose, the person by whom the money__w.as 3 advanced shall, in a winding up, have a right' *' ' priority in respect of the money so advanced and paid, up to the amount by which .the=--
respect of which the ernploye'e or other person , his right, would have been entitlerl.t'to'--priori-w'"iris, :_~ the winding up has been diminished by reason. of-,_ ' the payment having beer:-.made}.V_ (5) The foregoing debts _
(a) rank equally amongand be paid in full, unless the ashsets's.a,re.v inssuljticient to meet them, in which case they shall in equal proportions; gndi' " . =
(b) so--far-- company, available j'or'pay"rnent"fof~ general creditors are insufficient to 'meet. the:TL_ have pnloriiy over the claims of holders of debentures 'under any floating charge created byr._theA'ctqrrg33any, and be paid accordingly out (forty prope,riy...-sornprised in or subject to that s charge.
i Subject retention of such sums as may
-b_e'~necessary for the costs and expenses of the ' w'inding.__.~~up, the foregoing debts shall be ' discharged forthwith so far as the assets are s.u_ff_lci.ent to meet them, and in the case of the debts to which priority is given by clause {d} of " sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise 4' prescribed.
{7} In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale thereof : 2 // W28".
Provided that, in respect of any money paid under any such charge, the landlord or other personshall have the same rights of priority'. the person to whom the payment is made.
(8) For the purposes of this section {a} any remuneration in respectmof, C2, periodof _ A holiday or of absence from work through.sickness_"~, or other good cause shall be deemed to bet wages l' in respect of servicesr.endered"to the 'corripany during that period;
(b) the expression 'iaccrued holiday' remuneration' includes, in relar2ion., to any "'pers'on, all sums which, by virtue ¥eith'er' iofg contract of ernployrnent or of"any" enactment [including any order ,made-- or di.r.e'ciion'v .jgivenf under any €F1€1CtI?1;,>,,~m;;:,,,,, we _rpgyab_1,e j-on account of the ren'u5lneratto'n"--V._which _.in the ordinary course, lirxijiie beco~me--payable§ to him in respect of aperioloi of l"lolidayr§"-had employment with the '.,company.",Co,n'tinue,d"unfit [he became entitled to be allowed the. holiday:. * llbldithe'expFessioiitemployee" does not include a ' *worlcma.n; and] ' 'expression "the relevant date" means~
-ti} '~in»the.. case of a company ordered to be wound it ' up.,corr:;2i.ilsorily, the date of the appointment (or firs=t'yjap'pointnient} of a provisional liquidator, or if no such appointment was made, the date of the 2 a winding up order, unless in either case the company had commenced to be wound up A' ' voluntarily before that date; and
(iii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary winding up of the company. {9} This section shall not apply in the case of a winding up where the date referred to in sub- section [5] of section 230 of the Indian Companies Act, 1913 (7 of 1913), occurred before the lee commencement of this Act, and in such a case, the provisions relating to preferential payments. __ which would have applied if this Act had not been passed, shall be deemed to remain.
15. On a perusal of the said .sect--i.ons--'_:it is"i~noted.l_fthVa.t it proviso to Section 529(1) was adde:d,in::'th'eV year} that the security of every secu.re'd,V_creditor shallv_be_;deem:ed to- V be subject to a pari passu char§ev.:in'if,aVour"ofthegworkmen to the extent of the worlilmelifsf,p:ortioi1.,therein and that in case a secured creditoriiilstead' o£,re]inqui~shing his security and proving to frelaiizlells his seCurity-- the liquidator' "entitled tohiepfiresent the workmen and enforcesuch' realized by the liquidator by way of' eriforcpeinentblofhsuch charge shall be applied to the divsoharge of dues and so much of the debt due to ' such Securetdv creditor as could not be realized by him by vi1'tue orf'::h'¢;: foregoing provisions of this proviso or the arriouritof the Workmeifs portion in his security, whichever , is less shall rank pari passu with the workmeifs dues for the 27-purpose of Section 52943;. Further for the purpose of it "Sections 529, 529-A and 530, workmen in relation to a company means the employees of the company being workmen within the meaning of the Industrial Disputes Act. g, _ 22 ._
16. Similarly Section 529(3}(b} defines workmen dues in relation to a company to mean all. wages or salary or accrued holiday remuneration being payable and entit1emerrt"u_rider the Wokmen's Compensation Act and all sums workmen from a Provident Fund;,.....pension "gratuity it sfund or any other fund for the":.we:lfar'e of maintained by the company an'd.yworknn.ert's po,rtio1r--hVasi been. V L' defined to be the "workrrten_'s"poraon",lhinnrelatfon to the security of any secured V:ibred_ito;.%_vveomppany, the amount which bears tothe values-ofithe. proportion as the'ah1ottfit ojlitffte bears to the aggregate of W {U 2 the arnoun't'of'worknten's dues: and ;'~(ii} thelamounts of the debts due to the secured creditors. _____ ~ .$eetion'v529--A also has been inserted by virtue of the R V'p{A'rnendment] Act, 1985 and it begins with a no.n~0b--S&ta1ite clause and it says that in the winding up of "cornpany, the workmen dues and debts due to the secured llclredjitor stand a pari passu and they shall be paid in priority ' " -'to all other debts. Section 530 talks about preferential payments and it is in the case of winding up of a company 254 n23n and subject to provisions of Section 529~A the priority with regard to all other debts are given. But the said section deals with revenues, taxes, cesses etc., and they are all subject to Section 529~A. Therefore, even in a sit'uation- of distress where a winding up of a company takes' the context of a secured creditor si;,c,h_as tl:1e"3-'ti: irespondentld V' herein which is a financial institution, gtheil tine by a company to a secured s.Ered_itor haVe7;toA..yie1VdV in first instances to the debts thatllare (line to" izvorklnen and the two debts nanielyv wo.rkrnen~--.duesl and the dues to a financial institutions are ranked plarifipassla'; th'is'staghej"'-ith to consider Section 29 and Section V' of t1"ie7 State Financial Corporation
- /. Act;sEs.FS-tC«Act)' aaaaa 14 r of Financial Corporation in case ;'vi]'l?l/tiere any industrial concern, which is un.a_'_er a liability to the Financial Corporation under an agreernent, makes any default: in repayment of any loan 'oradvance or any instalment thereof [or in meeting its it =._oo--lig'aiions in relation to any guarantee given by the V' Corporation] or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the [right to take over the management or possession or both of the industrial concern], as well as the [right to transfer by way of 91/91! -24- lease or sale] and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation.
(2) Any transfer of property made by the l" 'C Corporation, in exercise of its powers _u;n-oler~., section(I), shall vest in the transferee all rights' the property transferred [as U" theA:'.transfer]CChad*. beerl.:"~_,CA:VC'A made by the owner of the property.
{3} The Financial Corporation sihalllhave the same and powers with gioodsv-Crnanufactured or produced wholly or part of the security "by h;ic{.C"_u2ith "respect to the original goods; if ,_ ' {4} [WV'here'C' been taken against an industrial' ,_concer'n}., the provisions of sub- section(1}; all cos"ts,'fCharg_es and expenses which in the opiniongof Corporation have been properly incidental thereto] shall be ' recoverable-.froIn the industrial concern and the money by it shall, in the absence of any con__irac.t ~i:o4j'..-the contrary, be held by it in trust to be appliedfirstly, in payment of such costs, charges and ., "expenses and, secondly, in discharge of the debt due to C {the-Financial Corporation, and the residue of the money V' so received shall be paid to the person entitled thereto. 1 (5) {Where the Financial Corporation has taken any action against an industrial concern] under the provisions of subsection (1), the Financial Corporation fer aggro shall be deemed to be the owner ofsuch concern, for the purpose of siiits by or against the concern, and shall sue and be sued in the name of [the concern].
"46-B. Effect of Act on other laws-- The provisio.ns» "
this Act and of any rules or orders made thereundierlll _' shall have effect notwithstanding anything therewith contained in any other law 'being! A in force or in the memorandurn or articles of of an industrial concern or» bother' having effect by virtue of any but save as aforesaid'. prcaijisionsllihis Act be in addition to, and not other law for the time being applicabieto at1c.indastr:iajtllconcem.]"
18. S.F.C. Act the rights of the i4'inanciai.._ 'Corporation:llinrcase of default is enunciated. Sec.;29{1) stateslthlat iierhere any industrial concern is under financial liability the Corporation, makes defauit in or advance or any instalment thereof or otherwi.se to comply with the terms of agreement with the financial corporation, in that event, the Corporation has to take management or possession of both of the Industrial concern, as well as the right to transfer, lease or sale and release the property pledged, mortgaged, hypothecated or assigned to the financial Corporation. The said right is the statutory right found in the Act, which came /'V M .4 into effect in the year 1951. Section 4613 of the act states that the provisions of this said Act and any rules or orders made thereunder would notwithstanding anything inconsistent other law or in the §\/Iemorandtirn ofy of Association of an industrial conceifn or 'inA"any 'othterf instrument having effect of .an}*:"1an';?: also states that the provisions inftadvdition to. and not in derogation of, for the time being appiicabieetto an industr§a1--5'con.eern. Therefore, it is nec,essary*gto hiarmon'iz'e th--e.VproVisions of the said Act with that' of the Act.
,a combined reading of the aforesaid protz1s'ions,°and..considering the fact that Sec. 529--A of ti1e"tCon.ipxe}.;1ies Act begins with a non obstante Clause, the sarne has an over- riding effect against any other provision of the Companies Act as Well as any other law "Which would obviously include the State Financial Corporation Act. What becomes apparent is that the dues of the workman would have to be met at the first .99:
n2'7di instance and to that extent Sec. 29 of the State Financial Corporation Act 1951 has to yield sec. _529--A of the Companies Act. Thus the workmen's due's.t rank para: passu with the dues of the secui'e--dvcr:e.tiito'r'sé will have to be paid from theyproceed-sit;.theu Company's assets including , secured creditors. The State Fina.nCial",Clorporationh' cannot decide any V d.ispute""as_:'--to-athe it apportionment between the workmen;s_"due~L§ 'own dues and therefore the, r:ight oflthei 'Corpo1iatiton"§Jvhich is a secured credit0i"i----tv.o_:sell by-itself and outside Winding up pro.ceedix1g to the pari passu claim of the unpaidhh worl:_Inen;«..."-it must seek the leave of the v ., .__Cou"r't 'fv'-mthe limited purpose of ensuring that the'-pari" charge in favour of the workmen is the imposition of suitable conditions underyvthe supervision of the Company Court, as held in thefcase of International Coach Builders Limited V/s. (2003(114) Company Case 614). Though there is no non--obstante clause in Sec. 29 of the State Financial Corporation Act, but Sec. 46-8 of the said Act gives 22 mggo overriding effect on all Acts. However, what is to be noticed is that Sec. 529--A of the Companies Act contains a non obstante-clause. The said proVisioVIi.44_Was inserted by virtue of an amendment made . 1985 and therefore, the later fitlieu "' it Companies Act would prevail over Pies} 2'Q._'ofV'the':Stpat:«;_* Financial Corporation Act tothat efktent Vonlyi C7lfi"i.ereiic>re, the resultant position is that___\iifher1»._sa1e.of theypaissets of the company in liqtiidation C by a secured creditor it should he the Company Court only v'en'abl.e tovrensure that the Workers dues are taken_care.of.._V.._ "
analogy' which is applicable by virtue of Section ..529_--A 530 of the Companies Act in a case where a cornpany winding up can also be applied to the «V factsaof the present case where the company has stopped its Cigrnariupfacturing activities and despite there being no . proceedings with regard to winding up, the fact remains that "the workmen's dues have priority viz-- a-- viz the dues to the it financial institution namely the KSFC, and in the instant 5::
wggn case whatever amounts are realized, they musty' be distributed subject to a pari passu charge in _fayou1_~* workmen to the extent of the workmen's *;*i:jere1'c$re,..,V even in the case of closure of mL?inufact*t1ring'AAac_tivi'i:yVbys. company in the context of their being 'workn1e--n's" dues and does to a secured creditor, to be' said dues have to be discharged Section 529 and Section 529--A of as the said section begins'*.ttrit}1 a therefore, in the instant have to make the payments" llthe""V\tvorkmen' in terms of the Sections of the Companies Act and thereforellby.Vltavking_ note' the said Sections, we feel that the ., appeal; by Athe..appeliants in the instant case would have ' tobe allo-We.dl"'and the same has to be disposed of by directing to comply with the procedure mentioned in 'V secltions 529A, and 530 of the Companies Act and ., accordingly distribute and discharge dues of the company to 'fheyvorkmen and also to the financial institutions. %, m3QW
21. For the aforesaid reasons, the writ appeal is disposed of in the above firms. Parties to bear their own cosfrséa 1UDGEo jSfir;'!,i/3 _ _ KVN*