Companies Act Case Law Radheshyam Ajitsaria & Anr Vs Bengal Chatkal Mazdoor Union & Ors.

CASE NO.:
Appeal (civil) 4101-4103 of 2004

PETITIONER:
Radheshyam Ajitsaria & Anr.

RESPONDENT:
Bengal Chatkal Mazdoor Union & Ors.

DATE OF JUDGMENT: 24/05/2006

BENCH:
Dr. AR. Lakshmanan & R.V. Raveendran

JUDGMENT:
J U D G M E N T
WITH

SLP(C) Nos. 6257-6258 of 2004

Civil Appeal Nos. 5906 and 5907 of 2004
Dr. AR. Lakshmanan, J.

CIVIL APPEAL NOS. 4101-4103 OF 2004

These appeals were filed against the final judgments and
orders dated 3.3.2004 of the High Court at Calcutta passed in
APOT No. 271/2001, APOT No. 162/2001 and APOT No.
272/2001. By the said final judgments and orders, the Division
Bench of the Calcutta High Court held that the appellants have
to be considered as members of the Nemani Group are not
entitled to receive payments on the ground that the said group
being the profounders of scheme and on the ground that the
dues shown by themselves had not been adjudicated either by
the Court or by the Registrar.

SLP NOS. 6257-6258 OF 2004
These special leave petitions were filed by M/s Niraj Trading
Company, a registered partnership firm represented by one of its
partner  Shri Krishna Kumar Nemani and six others (known as
Nemani Group). These two special leave petitions were filed by
members of the Nemani Group against the Bengal Chatkal
Mazdoor Union, the Official Liquidator, the Registrar High Court
and Baranagore Jute Factory and the other Mazdoor and
Employees Union. These petitions were filed against the final
judgment and order passed by the Division Bench of the High
Court at Calcutta in APOT Nos. 227 of 2001 and 228 of 2001
dated 03.03.2004 whereby the Division Bench has allowed the
appeal of contesting respondent No.1 (Bengal Chatkal Mazdoor
Union) and set aside the order passed by the learned Single
Judge dated 08.03.2001 which order had allowed the petitioners
 M/s Niraj Trading Company and others of Nemani Group to
receive one-fourth of the adjudicated claim from the Registrar,
Original Side of the High Court at Calcutta upon furnishing a
Bank Guarantee to the satisfaction of the said Registrar of the
equivalent amount. The said order was set aside by the Division
Bench on the ground that the claim of the petitioners had not
been adjudicated and also by ignoring the earlier orders dated
30.11.1998 and 01.12.1998 passed by the Division Bench of the
High Court which had held that the claims of the unsecured
creditors including the petitioners had been adjudicated.

CIVIL APPEAL NOS. 5906 AND 5907 OF 2004

These appeals were filed by Bengal Chatkal Mazdoor Union
and Baranagore Jute Factory PLC Shramik Sabha respectively
against Radheshyam Ajitsaria, Ashok Ajitsaria, Official Liquidator
and Registrar, High Court and the Barnagore Jute Factory. The
above appeals were filed against the final judgments and orders
of the High Court at Calcutta passed in APOT No. 271 of 2001,
APOT No. 162 of 2001 and APOT No. 272 of 2001 dated
03.03.2004. The grievance of the appellants in these two appeals
are that the Division Bench while allowing the appeals did not
consider the case of the Unions and did not direct disbursement
of the money to the workers who were members of the Unions.

BACKGROUND FACTS:
Baranagore Jute Mills PLC (for short `the Company’) was
under the management of Jardine Henderson Limited. On the
failure of the jute factory to pay dues of several of its creditors,
various winding-up petitions were filed in the High Court under
the provisions of the Companies Act, 1956. By an order dated
28.10.1987, the Company Judge directed winding-up of the
Company. The Court appointed the Official Liquidator with a
direction to take possession of the assets of the said Company.
An application was made by one – Shri Raj Kumar Nemani
praying for stay of the winding-up proceedings of the Company
and for revival of the Company as per a Scheme submitted and
for appointment of an ad hoc Committee of Management to run
the affairs of the said Company. The six Unions agreed to the
Scheme as it was to the benefit of the workers. The learned
Company Judge stayed the winding up by order dated 15.9.1988
and appointed an ad-hoc Committee of Management to re-open
the mills, but however maintained the assets of the Company
under the Official Liquidator. One of the creditors filed an appeal
against the order dated 15.09.1998. An interim order was
passed by the Division Bench of the High Court appointing Joint
Special Officers under whose supervision the Committee of
Management was to be constituted on an ad-hoc basis with other
directions.
Mr. Raj Kumar Nemani being aggrieved by the order dated
27.09.1988 passed by the Division Bench filed a special leave
petition before this Court on 07.10.1988 and this Court, by an
order dated 30.11.1988 directed that the scheme proposed by
Raj Kumar Nemani supported by the workers and unsecured
creditors be accepted with a direction for implementation of
detailed Scheme. The learned Company Judge was directed to
work out the Scheme.
The order passed by this Court on 30.11.1988 reads as
under:-

“R.K. Nemani & Anr. .. Appellants

-Versus-

Shiva & Co. & Others .. Respondents
ORDER

Special leave granted. Heard, learned counsel for the
parties.

Having regard to the scope of this appeal and having
considered the report of the Special Officer, dated 13th
November 1988 made pursuant to the order of this Court,
we are of the opinion that the scheme supported by the
workers and unsecured creditors of Raj Kumar Nemani, be
accepted and a detailed scheme on that basis be formulated.
It is desirable that the scheme be implemented as soon as
possible and the workers and the creditors should be paid in
accordance with the scheme, approved today. Further, the
appeal is disposed of with a direction to work out the
scheme by the learned Company Judge, Calcutta High
Court, who is seized of the matter. It is contended by some
of the secured creditors that by the operation of the scheme,
the assets of the secured creditors should not be allowed to
be affected. This contention of the secured creditors may be
agitated before the Company Judge, if they are so entitled.
All intervention applications are dismissed without prejudice
to their rights, if any, to applicants move the Company
Judge, Calcutta High Court.

We express our appreciation of the work of the Special
Officer and on the report he has submitted. The
remuneration of the Special Officer is filed at Rs.5,500/-
and to be paid out of the assets of the Company. The orders
of the learned Single Judge and the Division Bench are
modified to the aforesaid extent.

The appeal is disposed of accordingly. No order as to
costs.

Sd/-
(Sabyasachi Mukharji)

Sd/-
(S. Ranganathan)
New Delhi,
30th November, 1988.”

The learned Company Judge approved the Scheme on
16.6.1989. The Scheme, inter alia, provides for payment of all
unsecured creditors, workers, secured creditors, statutory dues
etc. On 02.05.1990, appellant No. 1 resigned from the
Management of the Company.
The learned Company Judge, while considering several
applications made by unsecured creditors complaining that they
were not paid by the Committee of Management, made an order
dated 16.12.1991 cancelling the Scheme, observing that the
Scheme had totally failed.
On an appeal preferred by the Committee of Management
against the order dated 16.12.1991, the Division Bench of the
High Court made an interim order dated 18.12.1981, reiterated
on 24.3.1992 directing payment of 1% of the respective claims to
all creditors on or before 7.1.1992. The Bench also stayed the
order passed by the learned Company Judge dated 16.12.1991
ordering cancellation of the Scheme. A special leave petition was
filed against the order dated 24.03.1992 by one of the creditors.
This Court directed the appeal pending before the Division Bench
of the High Court to be disposed of expeditiously, while also
directing payment to the unsecured creditors to be made @ 2%
per month from 01.03.1993. The said order dated 22.03.1993 in
S.L.P.(C) No. 6505 of 1992 reads as follows:-

“Acumen Trading Corporation & Anr. .. Petitioners

-Versus-

Committee of Management of Baranagore
Jute Factory & Ors. ..Respondents
Dated : 22nd March, 1993
Coram: Hon’ble The Chief Justice
Hon’ble Mr. Justice A.S. Anand

ORDER

1. We have heard counsel for all the parties.

2. By an order dated 16th December 1991, the learned
Company Judge of the Calcutta High Court cancelled the
scheme earlier sanctioned on the ground that the terms of
the scheme particularly in the matter of the schedule of
payments to the creditors had not been complied with.
That order was carried up in appeal before the Division
Bench of the High Court, which by its order dated 24th
March 1992 now under appeal, stayed the order of the
learned single Judge. The Division Bench directed that
instead of payment of 2% p.m. to the unsecured creditors
contaminated by the scheme, there should be payment of
1% p.m. That was the effect of the order dated 24th March
1992 of the Division Bench, when it referred to and
incorporated its earlier order dated 18th December 1991.

3. It is not disputed that payments to the unsecured
creditors have not proceeded strictly in terms of the
scheme. There is substantial short-fall. The parties who
have taken over the company under the scheme and who
are liable to effect payments to the creditors in terms of the
scheme cannot take shelter behind the fact that auditors of
the company have not scrutinised the books of account of
the company. That is a matter over which the unsecured
creditors have no control. Till the auditor examine the
books of account and report that the claim of the extent of
the claim of the unsecured creditors was not supportable,
there could be no suspension of the scheme of payments.

4. On a consideration of the matter it appears
appropriate that the appeal before the Division Bench of the
High Court requires to be disposed of expeditiously. We
request the High Court to dispose of the appeal within three
months.

5. In the meanwhile payment to the unsecured creditors
should proceed at the rate of 2% p.m. from 1st March 1993
and not at 1%. The difference for the past on that
calculation shall be made good within three months from
today. If there is failure to do so, it will be appropriate for
the Division Bench to put that circumstance also into scale
in deciding whether the order of the learned single Judge
setting aside the scheme should be interfered with in
appeal or not..”

6. However, the order of the Division Bench staying the
operation of the order dated 16th December 1991 of the
learned single Judge will continue unless the Division
Bench itself considers it appropriate to modify the same in
the light of any subsequent event. The Division Bench shall
also be at liberty to consider any applications for the
modification of the scheme.

With these observations and directions the special
leave petition is disposed of.
Sd/- Sd/-
(Virender K. Sharma) (S.R. Thite)
Court Master Court Master”

By subsequent orders, this Court directed the Committee of
Management to deposit Rs. 40 lacs in two instalments which was
to be deposited in the Registry of this Court. The said amount
was kept in term deposits. On 11.03.1994, this Court set aside
the order of the Division Bench of the Calcutta High Court
passed on 24.03.1992 reducing rate of payment from 2% to 1%.
This Court also directed the Committee of Management to deposit
from the month of April, 1994 onwards a sum of Rs. 8 lacs per
month with the Registry of Calcutta High Court. Further
directions were also issued while remanding the matter back to
the learned Company Judge for distribution of Rs. 40 lacs
amongst the creditors. The above order reads as follows:-
“Acumen Trading Corporation & Anr. .. Petitioners

Versus

Committee of Management of Baranagore
Jute Factory & Ors. .. Respondents

ORDER

We have heard counsel on both sides, originally the
learned Company Judge in the High Court directed the
“Committee of Management” to deposit sums equivalent to
2 per cent per month calculated on the basis of the extent
of unsecured indebtedness of the company. Subsequently,
there was a modification of this order as to the rate of the
payment reducing the extent from 2 per cent month 1 per
cent per month. This was done by the appellate bench.
The unsecured creditors have come up against this order.
The unsecured creditors claim that debts due and owing to
them are in the neighbourhood of Rs.3.4 crores and that it
would take a long time for payment if only 1% per month is
paid.

In the meanwhile, the Committee of Management has
deposited in the Registry of this Court, a sum of Rs.40 lacs
under directions of this Court. The said sums are in term-
deposits with the bank.

On a consideration of the matter, we set aside the
order of the Division Bench reducing the amount from 2
per cent per month to 1 per cent per month. The
Committee of Management shall from the month of April
1994 onwards, deposit every month sum of Rs.8 lacs.
Deposits will be made in the High Court.

The matter will now go back to the learned company
Judge, Calcutta High Court who will issue necessary
directions as to the appropriation and distribution of Rs.
40 lacs now in deposit, amongst the creditors and also as
to the distribution of the sum of Rs. 8 lacs to be deposited
every month by the Committee of Management. It is made
clear that if the Committee of Management commits
default in the matter of these deposits and fall in arrears
for any two months, it will be appropriate for the Company
Court to replace the Committee of Management by an
appropriate alternative mechanism. The amount of Rs.40
lacs in deposit in this Registry shall be transferred to the
account of the Registrar (Original Side), High Court of
Calcutta, together with accrued interest immediately after
the present deposits mature.

A grievance was aired by the petitioners that the
Committee of Management is appropriating to itself the
funds of the Company towards its alleged claims as
unsecured creditor. Sri Santosh Hegde says this is
impermissible. It is open to the petitioners to move the
Company Judge in this regard. The contention of the
Committee of Management on this point is also left open.

The interlocutory applications are disposed of
accordingly.

Sd/-
CJI

Sd/-
(S. Ratnavel Pandian)
New Delhi,
March 11, 1994.”

On 13.12.1994, the learned Company Judge appointed a
new Committee of Management composed of the Jain-Jalan
group, while issuing necessary directions for deposit of Rs. 64
lacs by the Jain-Jalan group with the Registrar of the High
Court. The Company Judge also directed certain lump sum
payments to six substantial creditors, except Nemani Group on
the basis of the list approved in the Court’s Scheme prior to cut-
off dates in October, 1987 before issuing advertisement inviting
claims from creditors, while directing payments to be made to
certain parties.
An appeal against the said order dated 13.12.1994, the
Division Bench allowed the Jain-Jalan group to continue and
carry on with the process of the Scheme, but set aside the
direction for preferential payment to six named unsecured
creditors.
The learned Company Judge by order dated 23.12.1996
also directed all unsecured creditors to lodge their claims with
the Registrar of the High Court. The learned Company Judge, on
the note of the Registrar, directed, inter alia, the Registrar of the
High Court to confine to the claims of those unsecured creditors
as on 28.10.1987 i.e. the date of winding-up order and the
amounts quantified against their names in the list of unsecured
creditors appended to the Company Application No.63 of 1987
affirmed on 27.4.1997. Pre-scheme unsecured creditors
including the appellants lodged their respective claims with the
Registrar on 27.02.1997. The Registrar submitted the second
report excluding the names of the appellants (Radheshyam
Ajitsaria) while including the name of the Nemani group. The
Company Judge, on an application filed by the appellants
(Ajitsaria’s group) directed the Registrar to hear to the
submissions of the appellants with regard to their exclusion. The
appellants made their submissions and filed written notes in
support of their contentions before the Registrar and thereafter
the Registrar, on 23.04.1997, submitted a report including
names of the appellants (Ajitsaria’s group) as persons entitled to
receive payments in terms of the Scheme. The Company Judge,
by a detailed judgment dated 9.9.1998 directed the Registrar to
make payments of all creditors as per the revised statement
enclosed to the Supplementary (Second) Report, except to the
Nemani group. The Division Bench, in an appeal against the
order dated 09.09.1998 filed by Jardine Handerson Ltd., made
an order on 30.11.1998/1.12.1998 set aside the Registrar’s
report insofar as the same exceeded the amount mentioned in
the list annexed to Company Appln. No.63 of 1987. The
Registrar, despite the appellants not being held as part of the
Nemani group, however, did not make any payments to the
appellants. The appellants filed an application by way of Notice
of Motion, inter alia, praying for modification of the order dated
09.09.1998 and for a further direction not to treat the appellants
as part of the Nemani group with a further prayer for immediate
payment in terms of the sanctioned Scheme. On 08.03.2001, the
learned Company Judge directed payments to be made to the
appellants, inter alia, holding that the appellants were not the
part of the Nemani group and that their claims were already
adjudicated upon and settled by the Registrar, Original Side.
One Shri Chetan Chowdhury claiming himself to be one of
the Directors of the Company filed an appeal against the order
dated 08.03.2001. The Division Bench, while granting liberty to
the appellants to withdraw the amount deposited against its
name/claim by furnishing a Bank Guarantee also recorded that
it is not clear as to why Chetan Chowdhury and his group could
be in the possession of the Company and listed the appeal for
further directions.
On 14.05.2001, the appellants – Ajitsaria’s group received
payments from the Registrar of the High Court upon furnishing
the requisite Bank Guarantee. Learned single Judge of the High
Court passed an order on 19.12.2002, inter alia, holding that the
possession of the Company by the alleged Board of Directors was
wrongful, while directing the Official Liquidator to take
possession of the Company (in liquidation). Several appeals were
preferred from the order. The Division Bench, while staying the
operation of the order dated 19.12.2002, directed the Joint
Special Officers to take possession.
The Division Bench in appeals filed against the order dated
08.03.2001 made an order dated 3.3.2004 directing re-
adjudication of the claims of the appellants which had already
been adjudicated. According to the appellant, the Division Bench
without appreciating that the appeal itself was not maintainable
having been filed by 9 outsiders having no locus standi is not
correct in directing re-adjudication of the claims of the petitioner.
The Bench also dis-allowed the appellant’s rights to claim the
said amount as a member approved in the list of unsecured
creditors distinct from the Nemani group. Being aggrieved by the
impugned judgment dated 3.3.2004, the appellants filed the
above appeals in this Court. This Court, on 08.04.2004, issued
notices in the special leave petitions and also directed that the
Bank Guarantee filed by the appellants with the Registrar of the
High Court on the original side shall be kept renewed until
further orders. By order dated 12.07.2004, leave was granted.
The Registrar of the High Court issued two certificates, inter
alia, certifying that the last instalment of Rs. 8 lacs was
deposited on 8/9.12.1999 and also certified that a sum of
Rs.2,09,70,647.56 p. was lying with the Registrar in a separate
account.
We heard Mr. Jaideep Gupta, learned senior counsel
appearing for the petitioners in S.L.P.(C) Nos. 6257-6258 of 2004,
Mr. Rana Mukherjee, learned counsel appearing for the
appellants in Civil Appeal Nos. 4101-4103 of 2004, Mr. Varinder
Kumar Sharma, learned counsel, Mr. S.K. Begaria, leaned senior
counsel, Mr. R.F. Nariman, learned senior counsel and Mr.
Naresh Kumar, learned counsel appearing for the respondents.
Mr. Jaideep Gupta, learned senior counsel appearing for
petitioner No.1, M/s Niraj Trading Company and Raj Kumar
Namani, petitioner No.4, submitted that the High Court has
erred in holding that the dues shown against the members of
Nemani Group were shown by themselves and that dues of the
Nemani Group have not been adjudicated by the High Court or
by the Registrar. He would submit that the High Court has failed
to appreciate that the disbursement by Registrar took place after
submission of the third report dated 10.4.1997 and the payment
to pre-scheme unsecured creditors were available with the
Registrar, Original side. According to Mr. Jaideep Gupta, the
Division Bench should not make any discrimination amongst the
same category of pre-scheme unsecured creditors mentioned in
the list annexed to the scheme of management who have lodged
their claims with the Registrar, Original side.
Mr. Jaideep Gupta, learned senior counsel, submitted that
the Judges of the Division Bench have erroneously concluded
that the petitioners were not part of the pre-scheme creditors and
that their names were not included in the list of pre-scheme
creditors filed along with C.A.No.63 of 1987 and that the Bench
has also erred in holding that the claims of the petitioner had not
been adjudicated which was clearly contrary to the report of the
Registrar, original side, which was accepted by both the Judges
as well as the Division Bench. It was further submitted that at
the present stage the workers do not have a right to oppose the
payment to the Nemani Group out of the funds lying with the
Registrar, original side. In the light of the above, Mr. Jaideep
Gupta submitted that there is nothing on record justifying
withholding of payments to be petitioner-group, who undoubtedly
were pre-scheme creditors and whose claims had been finally
adjudicated upon by the Registrar, original side, which
adjudication has been upheld both by the learned single Judge
as well as by the Division Bench. Further based on such
adjudication all other unsecured creditors have been paid, while
only 25% of the total amount due and payable to the petitioner-
group has been directed to be paid by the learned single Judge
by the order dated 8.3.2001. The funds available at the hands of
the Registrar is far in excess not only of the 25% ordered to be
paid but in excess of the entire claim of the petitioner-group. It
was also submitted by Mr. Jaideep Gupta that a sum of Rs. 42
crores which was received by way of acquisition compensation is
now with the company. This apart, the assets are also lying with
the company. In these circumstances, it is submitted that it is
only just and proper that the order passed by the learned single
Judge be upheld and payments be made to the Nemani Group. It
is also pertinent to notice that all other unsecured creditors
including Jardine Henderson (the original management at the
time when the winding up order was passed) and the Jain Jalan
Group (being in management after 1994) have been fully paid
their dues as unsecured creditors out of the funds in the hands
of the Registrar, original side.
Mr. Jaideep Gupta took us through the pleadings,
annexures and orders passed thereon on various occasions by
different Courts.
Mr. Rana Mukherjee, learned counsel, appearing for the
appellants in Civil Appeal Nos. 4101-4103 of 2004 submitted
that appellant No.1 remained as a member of the Committee of
management only for a period of 11 months having resigned on
2.5.1990 and that appellant No.2 never participated in the
management and affairs of the company (in liquidation) and no
one including the workers made any claim and/or grievance
against the appellants at any point of time.
The said fact has been duly noticed and recognized in
various Court orders including the order of the Division Bench
dated 30.11.1998 and 1.12.1998 and the order of the Registrar
dt. 8.3.2001. According to Mr. Rana Mukherjee, the appellants’
firm Radheyshyam & Co. and Indian Agency never formed part of
Nemani Group and the same would be evident from the letters
written by the workers’ Union and submitted before the Company
Court. The appellants are the unsecured creditors of the
Company who were entitled to receive payment in terms of the
Scheme @ 2% p.m. at the entire payment in terms of the said
Scheme without interest was to be disbursed to them within a
span of four years and two months and accordingly the entire
amount became due and payable in the year 1993 itself. There is
also no allegation upon the appellants to disburse excess
payments to themselves as has been alleged against Raj Kumar
Nemani, therefore, the appellants stand on a different footing
from the Nemani Group of Companies/firms who have been
made entitled to receive only 25% of their claim upon furnishing
of bank guarantee. It was also submitted that the appellants
have received their dues as certified by the Registrar of the
Calcutta High Court under orders of the said Court upon
furnishing a bank guarantee which has been kept alive.
According to Mr. Rana Mukherjee, the main judgment and order
warrants interference by this Court as the appellants have been
wrongly excluded from receiving the payments though all other
creditors similar to the status of the appellants have received
their payments long back. Thus accordingly to him, there has
been denial of justice.
Mr. S.K. Bagaria, learned senior counsel appearing for the
Baranagore Jute Factory PLC Shramik Sabha, submitted that the
Scheme was sanctioned and approved by the High Court and by
this Court primarily taking into consideration the workers’
interests and that the workers and their Unions supported the
Scheme and the Scheme provided for payment of pre-scheme
outstanding dues and current dues of the workers. According to
him, Nemani Committee defaulted in making payment of wages,
provident fund, ESI, gratuity etc. not only towards the
outstanding pre-scheme arrears but also the current dues during
its period of management. In addition to the defaults committed
by Nemani Committee in payment of the said outstanding pre-
scheme dues, the said Committee also defaulted in paying the
workers; current dues during its period of management. It was
further submitted that all other pre-scheme unsecured creditors
who lodged their claims with the Registrar of the High Court,
have already received their payments and as against the
aforesaid, the workers have hardly received a small fraction of
their outstanding dues for the pre-scheme period and over and
above that, their huge dues got mounted for the current periods
during which Nemani Committee was in management. The
Scheme being primarily for the benefits of the workers and
unsecured creditors and all other unsecured creditors excepting
the appellants having already been paid, it is in the interest of
justice and in terms of the Scheme that the amounts
accumulated under the Scheme be directed to be utilized for
paying the workers’ dues and statutory liabilities on account of
Provident Fund, ESI, wages, bonus, gratuity, STL etc. He invited
out attention to Section 11(2) of the Employees’ Provident Funds
and Miscellaneous Provisions Act, 1952 which provides that the
amounts due from an employer shall be deemed to be the first
charge on the assets of the establishment and shall be paid in
priority to all other debts. It was submitted that the workers and
their Unions supported the scheme in expectation and hope that
their outstanding dues as well as current dues would be paid by
Nemani Committee as specifically provided in the Scheme.
Similar was the position when the Jain-Jalan Committee was in
management. However, when they came to know about filing of
applications by Sri Raj Kumar Nemani and by Sri Radheyshyam
Ajitsaria and their group concerns before the learned single
Judge of the High Court for payment of their dues out of the
funds accumulated under the Scheme, the Unions moved two
separate applications bearing C.A.No.9 of 1999 and C.A.No.10 of
1999 before the learned single Judge praying, inter alia, for not
directing any such payment without first paying to the workers.
Arguing further, the learned senior counsel, submitted that all
unsecured creditors excepting the appellants have already been
paid. In the aforesaid circumstances and in terms of the
Scheme, the amounts lying with the Registrar of the High Court
are required to be utilized for paying the workers’ dues.
According to him, the Division Bench of the High Court correctly
held that the release of any amounts to the Members of the
Nemani Group at this stage is not appropriate. However, the
Division Bench of the High Court erred in not directing for
payment of the workers’ dues out of the amounts accumulated
under the Scheme and lying with the Registrar as has been
contended by Shramik Sabha in the appeal filed by it
(C.A.No.5907/2004).
It was further submitted that as stated in C.A.No.5907 of
2004 filed by Shramik Sabha, the Division Bench should have
directed for utilizing the balance amount lying with the Registrar,
Original side, High Court of Calcutta for payment of workers’
dues and statutory liabilities on account of the Provident Fund,
ESI, wages, Gratuity, bonus etc. It was further submitted that a
period of 18 years has passed since approval of the Scheme by
this Court on 30.11.1988 and it will be fully in terms of the
Scheme as well as Section 11(2) of the Employees’ Provident
Fund and Miscellaneous Provisions Act, 1952, if the funds lying
with the Registrar are utilized for payment of the workers’ dues
including those on account of outstanding Provident Fund dues
mentioned above.
Mr. R.F. Nariman, learned senior counsel appearing for the
Bengal Chatkal Mazdoor Union, submitted that as per the
scheme, the workers were to be paid in a time bound schedule.
The arrears of back wages were to be cleared within five months
of the restarting of the mill. Several other dues, namely, gratuity,
ESI, Provident Fund, Welfare Fund etc. were also to be cleared in
the manner prescribed under the Scheme. However, these
payments were not made by the Nemani Group and instead a
large sum of money was paid to themselves.

It is alleged that the failure to pay the amounts is squarely
on account of the Nemani Group and at the time when these
arrears were mounting, they were paying themselves a greater
sum of money than was due under the Scheme. The appellants
cannot be allowed to take advantage of their own wrong. Mr.
R.F. Nariman further submitted that the Scheme has to be read
as a whole and in case payment is not made under one part of
the Scheme, i.e. to the workers, the same Scheme cannot be
relied upon to make a payment to the unsecured creditors. In
this context, he relied on the judgment of this Court in the case
of Workers vs. Rohtas Industries, (1987) 2 SCC 588 where this
Court held that the claims of the workers have a priority even
above those of secured creditors. Mr. R.F. Nariman drew out
attention to Section 529 A of the Companies Act, 1956 for the
proposition that the priority is to be given to the dues of the
workers. Though the winding up order has been stayed, the
provisions of Section 529 A of the Companies Act, 1956 will apply
in letter if not in spirit. According to him, the provision is
applicable in a winding up of an insolvent company and as per
Section 441 of the Companies Act, 1956, winding up is deemed
to commence upon the presentation of the petition for winding
up. Further, in case the money is disbursed without regard to
Section 529A of the Companies Act, 1956, and ultimately the
stay of the winding up is lifted, there would be an effective
annulment of the legislative mandate provided in Section 529A of
the Companies Act, 1956.
He also invited our attention to Section 11(1) of the
Employees’ Provident Fund and Miscellaneous Provisions Act,
1952 and Section 94 of the Employees’ State Insurance Act, 1948
which also provide for a first priority to these dues in respect of a
company in winding up.
Section 11(2) of the Employees’ Provident Fund and
Miscellaneous Provisions Act, 1952 is reproduced hereunder:
“11(2) Without prejudice to the provisions of sub-
section(1), if any amount is due from an employer
whether in respect of the employees’ contribution
(deducted from the wages of the employee) or the
employer’s contribution, the amount so due shall be
deemed to be the first charge on the assets of the
establishment, and shall, notwithstanding anything
contained in any other law for the time being in force,
be paid in priority to all other debts.”
While interpreting the provisions of Section 11(2) of the
Employees’ Provident Fund and Miscellaneous Provisions Act,
1952 and while noting that the Provident Fund Act is a piece of
welfare legislation have accorded priority to these dues over other
dues. In this context, he cited the following rulings:
1. Recovery Officer & Assistant Provident Fund
Commissioner vs. Kerala Financial Corporation,
2002(95) FLR 1024 paras 7,10,13,14 (High Court of
Kerala)
2. National Stock Exchange of India Ltd. Rep. By its
authorized signatory A. Sabastian vs. The Assistant
Provident Fund Commissioner Employees’
Provident Fund Organisation and the Managing
Director, Premier Securities Ltd. (W.P. Nos. 24857
and 25609 of 2001, para 32) High Court of Madras.
3. Manager, Vijaya Bank, Padubidri, Dakshina
Kannada vs. Regional Provident Fund
Commissioner, Sub-Regional Office, Balmatta,
Mangalore and Ors. 1999(5) Kar.L.J.459, para 7
(Karnataka High Court)

At the very least, by virtue of Section 11(2), the claims of the
Provident Fund authorities are akin to secured claims and,
therefore, have a priority over the unsecured claims and that the
amount of money lying with the Registrar is far less than the
arrears of the Provident Fund department and, therefore, in
consonance with the legislative mandate embodied in Section
11(2) of the Employees’ Provident Fund and Miscellaneous
Provisions Act, 1952, the money should first be paid to the
provident fund authorities before they are disbursed to
unsecured creditors. Concluding his arguments, Mr. R.F.
Nariman submitted that in the present case, substantial justice
has been done to the workers and no interference by this Court
is called for. When dealing with an appeal under Article 136 of
the Constitution of India, this Court comes to the conclusion that
there is no failure of justice, it is not bound to decide and
interfere even when a question of jurisdiction of the original
Court of Tribunal is raised and even if the impugned judgment is
wrong. The following rulings have been cited for the above
proposition:
1. Balvantrai Chimanlal Trivedi vs. M.N.
Nagrashna, AIR 1960 SC 407
2. Bulaki vs. Lal Dhar, (1997) 9 SCC 274, para 3
3. Union of India vs. Kulamoni Mohanty, (1999) 1
SCC 185 paras 4,6
4. Taherakhatoon vs. Salambin Mohammad, (1999)
2 SCC 635 para 20
5. Chandra Singh vs. State of Rajasthan, (2003) 6
SCC 545 paras 39 & 45
6. State of Punjab vs. Savinderjit Kaur, (2004) 4
SCC 58 paras 16 & 17

Mr. Naresh Kumar, learned counsel appearing for
Baranagore Jute Factory PLC (R-4 in SLP(C) Nos. 6257-6258 of
2004, furnished details in regard to the payment of arrears of
wages of the workers of the Mill, payment to the statutory
creditors, arrears of gratuity etc. According to him, Nemani 
Ajitsaria Group committed several offences; that they did not
make payment on receipt of arrear dues and statutory dues as
per the Scheme and that default in making current payment of
wages and other statutory dues and they siphoned huge sums of
money while they were running the Jute Mills. He submitted, at
the request of a section of the workers, Directors of the Company,
to control the Jute Mills and immediately thereafter filed an
application before the High Court stating the background under
which the Management took control of the Jute Mills and also
prayed for liberty from the High Court to take steps for revival of
the Company. The High Court appointed a Special Officer with
certain directions. He also furnished other details subsequent to
the appointment of the special Officer. He invited our attention to
the report filed by the Special Officer as per the directions of the
Division Bench, details about the status of the Company and the
details regarding the company’s writ disputing the arrear, PF
liability and their reply to the allegations made by the Nemani
Group. According to him, the funds are meant for disbursement.
It was never the intention of the High Court to allow Nemani
Group to run the mill for their own personal gain without
complying and/or paying the workers and other creditors. The
defaults and/or evasion made by them is their personal liability
as has categorically been clarified by the judgment dated
19.11.1994 passed by the High Court. He further submitted that
the arrears of wages of the Workers of the Mill have since been
reduced by the Committee of Management by payment of Rs.22
lacs on account of arrears of wages for two weeks and Rs.17 lacs
on account of 50% of the arrears of bonus for the year 1985-86
and that the arrears of wages now stands at Rs.54 lacs and at
Rs.17 lacs on account of the balance of the arrears of bonus
aggregating to Rs.71 lacs which would be paid by the Committee
of Management.
As regards payment to the statutory creditors, it was
submitted that the Committee of Management will pay the
aforesaid arrears of statutory dues which have accrued during the
previous management. Likewise, the arrears of gratuity payable
to the workers/employees who have already retired or
superannuated or resigned or ceased to be in service of the
company have accumulated during the period of previous
management to the tune of Rs. 36 lacs approximately. It was
submitted that the Committee of the Management will arrange for
payment of such amount of gratuity to such workers. It is to the
credit of the present management that they have apparently
succeeded in turning the Company and resurrecting the Jute
Mills. While the workers have jointly supported the achievement
of the present Management, the statutory creditors have also
come out in support of the present management.
In the above background, the questions of law that require
determination in the instant Civil appeals and the S.L.P. are as
under:
(a) Whether the Division Bench of the High Court
was entitled to allow the appeal without first
deciding the maintainability of the appeals as
directed in terms of the order dated 29.3.2001?
(b) Whether the Division Bench of the High Court
was entitled to withhold the payment of the pre-
scheme unsecured creditors in view of the
specific direction given by this Court on
31.3.1994?
(c) Whether the Division Bench was entitled to direct
re-adjudication of the claims, which were already
adjudicated contrary to the order passed by the
Division Bench of the High Court on 30.11.1998
and 1.12.1998?
(d) Whether the workers can have any stake and
have right to receive any payment from the fund
lying with the Registrar original side of the High
Court of Calcutta which was specially earmarked
for the pre-scheme unsecured creditors as
defined in the Scheme?
(e) Whether the finding and decision of the learned
Company Jude can be ignored and/or overlooked
on the ground that no enquiry was held by the
Registrar?
We have carefully considered the elaborate and lengthy
submissions made by the respective counsel appearing on either
side with reference to the pleadings, annexures filed and the
orders passed by the Company Court, the High Court and of this
Court.
As already noticed, Baranagore Jute Factory  petitioners in
S.L.P.) Nos. 6257-6258 of 2004, was ordered to be wound up on
October 28, 1987. The petitioners’ group comprises of (i) Niraj
Trading Company; (ii) Banwarilal Anup Kumar HUF, (iii) M/s Raj
Kumar Krishna Kumar, HUF; (iv) Raj Kumar Nemani; (v) Nemani
Trading Company ; (vi) Krishna Kumar Nemani and (vii) Raj
Kumar Jain constituted the largest group of creditors of the Jute
Factory and were accordingly included in the list of pre-scheme
creditors prepared and filed in C.A.No.63 of 1987 at S.Nos. 1 to 7
by the erstwhile management i.e. M/s Jardine Henderson Ltd.
After the winding up order was passed, a Scheme was
propounded to run the Jute Mill and for this pupose, a Committee
of Management was proposed to be constituted of M/s Niraj
Trading Company commonly referred to as the Nemani Group.
The said scheme propounded by the Nemani Group provided for
payments to workers, electricity dues, statutory creditors and
unsecured creditors. This comparmentalised payment
mechanism was adopted to ensure that everybody was paid in
accordance with and under the Scheme. The said scheme was
approved both by the High Court as well as by this Court on
November 30, 1988. The said scheme was finally approved and
passed by the High Court with the support of the secured
creditors as well as the workers. Thereafter some unsecured
creditors approached the High Court for payment under the
scheme and especially since pursuant to order of the High Court,
the payment under the scheme stood reduced from 2% as
envisaged under the scheme to 1%. The matter was carried up in
appeal to this Court and this Court directed the Nemani Group to
deposit a sum of Rs.40 lacs as and by way of an interim measure.
By an order dated 11.3.1994, this Court set aside the order of the
High Court reducing the amount from 2% to 1% and further
directed the Committee to deposit Rs.8 lakhs per month. The
amount of Rs.40 lakhs deposited by the Nemani Group was
directed to be transferred to the High Court. It is pertinent to
mention that at this stage no grievance was made by the workers
and as such the question of consideration of their claim does not
and cannot arise. Moreover, the order in no uncertain term
provides that the payments made pursuant to such order i.e.
order dated 11.3.1994 were to be disbursed amongst creditors.
We have already noticed that the Nemani Group was
replaced by the Jain Jalan Committee of Management. The
learned single Judge, by order dated 13,12,1994, directed that
the Nemani Group be replaced and the Jain-Jalan Group may
take over the Committee of Management subject to payment of
Rs.64 lacs and further directed payments to substantial creditors
except the Nemani Group. This order was carried up in appeal
before the Division Bench and the Division Bench by an order
dated 25.1.1995 set aside the order for preferential payments to
certain creditors and left the issue relating to payments to the
Nemani Group open. The learned single Judge, by an order dated
26.8.1996, in view of the substantial funds having accumulated
in the hands of the Registrar, Original side directed the parties to
file their claims as directed by this Court and further directed the
Registrar to adjudicate the claims in accordance with law. The
learned single Judge by its order dated 23.12.1996 clarified that
only pre-scheme unsecured creditors appended to the company’s
application being C.A.No.63 of 1987 affirmed on 27.4.1987 were
to be considered for payment. The Registrar, Original side was
further given the liberty to requisition the services of a Chartered
Accountant to adjudicate upon the claims of the unsecured
creditors. Thereafter, reports were prepared by the Registrar.
The third and final report dated 23.4.1997 of the Registrar was
accepted by the High Court. In the said report, it was
categorically recorded that full and final adjudication of the net
claim of pre-scheme unsecured creditors will appear as per the
schedule set out hereinbelow. The names of the members of the
Nemani Group were included at S.Nos. 60 to 66 and an amount of
Rs. 2,29,34,500/- was adjudicated to be outstanding as far as
the Nemani Group is concerned.
The learned single Judge by order dated 9.9.1998 accepting
the final adjudication made by the Registrar directed payments to
be made to all the other unsecured creditors except the Nemani
Group on the ground that the Nemani Group had made larger
payments to members of its group in comparison to other
unsecured creditors. This order was subsequently affirmed by
the Division Bench in an appeal filed by Jardine Henderson. The
Division Bench while disposing of the said appeals upheld the
adjudication made by the Registrar, subject to adjustments.
Nemani Group filed C.A.No.627 of 1998 for modification of the
order dated 9.9.1998. On 8.3.2001, the learned single Judge
disposed of C.A.No.627 of 1998 filed by Nemani Group for
modification of the order dated 9.9.1998. The learned single
Judge, after noticing that all other unsecured creditors had been
paid of and even thereafter substantial funds were left in the
hands of the Registrar, directed payment of 25% and/or one
fourth of their settled claim after adjustment of payments already
made. Appeals were preferred by the workers’ Union and
respondent No.4 (Jute Factory) under the new Management of
Chetan Choudhary. The Division Bench while admitting the
appeal by an order dated 29.3.2001 directed that the Nemani
Group be allowed to withdraw the monies subject to furnishing a
Bank Guarantee of the like amount. Further doubts as to the
locus standi of Chetan Choudhary to represent the Company
were also raised and the same were kept open. The workers
contended that there was no change in circumstances or
additional material on record justifying the direction for payment
to the Nemani Group and further that they had filed C.A.Nos. 9
and 10 of 1999 giving details of their dues. In so far as the
change in circumstances is concerned, by the time the order
dated 8.3.2001 was passed, all other unsecured creditors had
been paid of and still substantial sums were available for
disbursement. As regards the pending applications are
concerned, this court has noticed, during the course of hearing,
that the said applications were really in the nature of
intervention applications. In spite of the above, the Division
Bench of the High Court has erroneously concluded that the
petitioners-Nemani Group were not part of the pre-scheme
creditors and/or that their names were not included in the list of
pre-scheme creditors filed along with C.A.No. 63 of 1987. The
Division Bench also erred in holding that the claims of the
petitioners-Nemani Group had not been adjudicated which, in
our opinion, was clearly contrary to the report of the Registrar,
which was accepted by both the learned single Judge as well as
by the Division Bench.
The above facts clearly go to show and administer that the
workers do not have a right to oppose the payment to all
unsecured creditors out of the funds lying with the Registrar,
Original Side, High Court. The reasons for our conclusion are as
under:
(a) By order of this Court the said funds are meant for
disbursement only for unsecured creditors. Separate
arrangements have been made under the scheme for
payment of other dues including workers dues. The
said scheme sanctioned in 1989 is still in operation
and the present Committee of Management is
operating under the same scheme.
(b) Since 1994, i.e. after the Petitioner Group was
superceded by the Jain Jalan Group, no demands of
any nature relating to any outstanding payments were
ever raised by the Workers.
(c) In any event, it has been clearly recorded in the order
dated November 18, 2004 whereby the said Chetan
Choudhary Group has been allowed to continue in
management, that the said Chetan Choudhary Group
is being allowed to be continued on the same terms
and conditions as under the original sanctioned
scheme, thus making them liable to make payments of
all dues past or present.
(d) Therefore, the company being a running concern, the
alleged dues of the workers cannot be claimed against
any specific member of the management committee.
The dues if any, are against the company and not
against any individual members of the Committee of
Management. There is no question therefore of
holding up payment due to the unsecured creditors on
the ground that workers dues are alleged to be
outstanding.
(e) Further, since the company still continues to function,
Section 529-A of the Companies Act cannot be pressed
into service by the workers. The protection of section
529-A is available only when a company has been
wound up, Official Liquidator has taken over the
assets and disbursements are being made by the
Official Liquidator in course of the winding up of the
company. There is no question of the worker claiming
a preferential right or payment while a company is
running and carrying on business in the usual course
and incurring daily expenses and liabilities.
In the light of the above, Mr. Jaideep Gupta, learned senior
counsel, submitted that there is nothing on record justifying
withholding of payments to the Nemani Group, who undoubtedly
were pre-scheme creditors and whose claims had been finally
adjudicated upon by the Registrar which adjudication has been
upheld both by the learned single Judge as well as by the
Division Bench. It is also not in dispute that the funds available
at the hands of the Registrar is far in excess not only of the 25%
ordered to be paid but in excess of the entire claim of the
petitioner-Nemani Group.
In view of the above, we are of the opinion that the claim of
the Nemani Group and Niraj Trading Company has to be upheld
and accepted and the payment should be ordered to.
In the result, S.L.P(c) Nos. 6257-6258 of 2004 are allowed
and the impugned judgment and order dated 3.3.2004 in APOT
Nos. 227 & 228 of 2001 common with APOT No. 271 of 2001
passed by the Division Bench is set aside.
The claim made by Radheyshyam Ajitsaria and Anr. In
C.A.Nos. 4101-4103 of 2004
We have already discussed in detail in paragraphs supra
about the facts and circumstances of the above appeals and the
various proceedings taken out by the parties and the orders
passed thereto.
In view of the discussion made above, the following
conclusion can be arrived at:
i) Appellant No.1 remained as a member of the
Committee of management only for a brief period of
11 months having resigned on 2.5.1990. Appellant
No.2 never participated in the management and
affairs of the company, no one including the
workers made any claim and/or grievance against
the appellants at any point of time.
ii) The appellants are unsecured creditors of the
Company who were entitled to receive payment in
terms of the scheme at the rate of 2% per month
and the entire payment in terms of the said scheme
without interest was to be disbursed to them
within a span of four years and two months and
accordingly the entire amount became due and
payable in the year 1993 itself.
1. At all material times, there was no dispute with
regard to the fact that Nemani Group of Company
consisted of seven companies/firms which are
distrinct and separate from the appellants.

The said fact has been duly noticed and recognized in various
Court orders including the order of the Division Bench of the
High court dated 30.11.1998/1.12.1998 and the order of the
learned single Judge dated 8.3.2001.
iv) There is no allegation upon the appellants of
disbursing excess payments to themselves as has been
alleged against Raj Kumar Nemani, therefore, the
appellants’ stand on a different footing from the
Nemani Group of companies/firms who have been
made entitled to receive only 25% of their claim upon
furnishing of bank guarantee.
v) That the appellants have received their dues as
certified by the Registrar of the High Court under
orders of the High court upon furnishing a bank
guarantee which has been kept alive.

So far as the workers’ claim in concerned, the scheme
which was accepted by this Court on 30.11.1998 contained
disbursement of the payment to all the creditors in the said
scheme. The said scheme clearly mentioned the manner in which
the creditors are entitled to receive the payment. The statutory
dues, such as Provident Fund, E.S.I. and workers’ dues on
account of wages salary are to be liquidated in the manner as
provided therein and unsecured creditors were made entitled to
receive payment @ 2% per month save and except initial payment
@ 5%. The said scheme was supported by the workers. Unlike
unsecured creditors, at no point of time workers had come up
before the company Judge or before this Court alleging that
payments have not been made to them pursuant to and in terms
of the scheme, though the workers all along appeared in the
proceedings.
In any event since the Company is functioning as a going
concern on and from the date of implementation of the Scheme of
Arrangement as formulated and approved by the High Court as
well this Court, the question of the workers at this stage when the
winding-up proceedings have been permanently stayed under
Section 466 of the Companies Act, 1956 to state to have a better
claim by virtue of Section 529A of the Companies Act, 1956 does
not and cannot arise. The workers having a priority over creditors
can come into play only the winding-up process is in motion and
the Official Liquidator take steps to formalize winding-up. In the
instant case, after the Scheme had been sanctioned, the question
of winding-up would arise only if the order of permanent stay
granted was to be lifted on any party’s complaining of failure of
the Scheme or inability on the part of the Company to make
payments either in terms of the scheme or otherwise. The
contention to the contrary raised by Mr. Nariman has no force.
Likewise, the reliance upon the provisions of the ESI and
the EPF Act are inapposite inasmuch as by virtue of orders of this
Court as also noted by the Division Bench of the High Court that
the amount to be paid at the rate of Rs. 8 lacs per month as
directed by this Court was to be kept secured for payment to un-
secured creditors only, the workers are therefore estopped from
resorting to taking recourse to the provisions of Section 11(2) of
the EPF Act since the same was available to them even at the time
this Court had directed the said sum to be earmarked for
payments to un-secured creditors.
In view of the fact, that the manner in which the unsecured
creditors are entitled to receive the payment has been specified
and more particularly, when all the pre-scheme un-secured
creditors who have lodged their claims with the Registrar, High
Court, Calcutta have received payment, there cannot be a
justification in withholding the payment of the appellants and
petitioners who were also entitled to receive payment as other pre-
scheme un-secured creditors.
In our view, the provisions as contained under section 529A
of the Companies Act, 1956 are not applicable in the facts and
circumstances of the case as the order of winding-up has been
stayed and the company is being run under the scheme as a
going concern.
One Committee of Management is being replaced by another
Committee of Management on the same terms and conditions
with an object to implement the same scheme. Thus the dues of
the creditors including the workers and other statutory dues are
to be paid by the Committee of Management. Even, at present the
company is being run by a committee of Management and are
now supported by the workers as would appear from the order
dated 18.11.2004.
This apart from the report of the Joint Special Officers
dated 20th August, as submitted by respondent No.4 before this
Court it would further appear that the present committee of
Management in implementation of the said scheme, is making
payments of arrears as well as current dues of the workers.
So far as the provision as contained under section 11 sub-
clause 2 of the Employees Provident Fund & Miscellaneous
Provisions Act, 1952 are concerned, the same, in our opinion,
would not debar the appellants to receive their payments as the
appellants have been made entitled to receive the payments in
terms of the scheme and charge if any, would crystallize over the
assets of the company and not upon the money of the appellants.
It is interesting to notice that the workers on the one hand
are opposing the claim of the appellants on the ground that they
have not received the payment. On the other hand, the workers
have not made any claim from the money which has been
received by the respondent No.4 as compensation approximately
to the tune of Rs.41 crores for acquisition of the land by the
National High-Way Authority of India for 17 acres valued at Rs.
41 crores reported in Competent Authority vs. Barangore Jute
Factory & Ors., (2005) 13 SCC 477. Thus it is crystal clear that
the Workers’ Union have been set-up by the present committee of
management so as to obstruct the payment to these appellants.
In our considered opinion, the impugned judgment and
order warrants interference by this Court under Article 136 of the
Constitution of India as the appellants have been wrongfully
excluded from receiving the payments though all other creditors
similar to the status of the appellants have received their payment
long back thus there has been denial of justice.
Insofar as the argument of Shri K.P. Bagaria, learned senior
counsel appearing on behalf of other Workers’ Union with regard
to the liability of making payments towards Provident fund dues
and the judgment reported in 1995 Volume I CLJ page 89, it is
not in dispute that the appellants were not parties to the
proceedings in which the said judgment was delivered, and it was
Mr. Raj Kumar Nemani who had been held to be liable by the
High Court to pay provident fund dues. The liability to pay
Provident Fund dues remains with the company which is still run
a going concern.
Insofar as the outstanding amounts are concerned, these
very unions had sworn affidavits filed in July, 1993 before the
High Court stating that the Nemani group after taking over
management has paid substantial part of their dues.
Insofar as the scheme is concerned, the said scheme was
initially for a period of 8 years and the amounts mentioned
therein were to be liquidated over the years and not immediately
upon the scheme coming into force. The payments which were to
be made immediately upon implementation of the scheme, were
accordingly made. The petitioner group was replaced midway into
the scheme and did not complete the entire tenure of the scheme.
The new Committee of Management (Jain-Jalan) which replaced
the petitioner group, took over the management on the same
terms and conditions as contained in the scheme, thereby
assuming and/or taking over the entire responsibility of payment
of all outstanding amounts including workers dues and other
employee benefits including Provident Fund.
It is pertinent to note that the fund which is the subject-
matter of the present proceedings was created only for the
purpose of payment of unsecured creditors under the scheme
framed by the High Court and accepted and affirmed by this
Court by two orders dated 17.12.1993 and 11.03.1994. This
Court affirmed that the amount of Rs. 8 lacs per month out of the
revenues of the Company would be kept aside in the hands of the
Registrar, Original side and pay to the unsecured creditors alone
@ 2% per month. Admittedly, the said corpus has been treated
by successive orders of this Court and the High Court as being
the dues of the unsecured creditors alone. None of these orders
were ever appealed against or set aside. It is too late in the day to
contend that the said fund would also be utilized for payment of
workers dues and or other statutory dues for which the scheme
made separate arrangements. Both Jardine Henderson and Jain-
Jalan Committee who were in management of this Company at
various points of time have been allowed to recover their entire
dues as unsecured creditors out of this fund without reference to
the workers dues and or other statutory dues. At no stage,
whatsoever, have any part of the said fund been utilized by the
High Court for payment of any of the workers dues or other dues.
The said fund, in our opinion, therefore, cannot have a different
character merely when it comes to the dues of the present
petitioners.
It is important to note that by orders of Court, the company
(in liquidation) was not in fact wound up but was allowed to
continue as a going concern. This was undoubtedly in the
interest of the workers. So long as the company continued as a
going concern, the workers not only continued to get their wages
and other benefits and also retained their rights to be reimbursed
out of the assets of the Company in the event that the assets have
to be sold in winding up. In fact, the fixed assets of the Company
are enormously valuable. It has land in excess of 50 acres in
prime locations out of which 17 acres was acquired by the
National High-way Authority upon payment of compensation of
Rs. 41 crores recently to the present Company. The dues of
workers are, therefore, in no jeopardy whatsoever. When the
Company continues as a going concern, it is the dues of the
unsecured creditors which are most vulnerable and it is for that
purpose this Court by its various orders ensured that a separate
fund should be created for the unsecured creditors. In our
opinion, it is fair and proper that the funds so created should only
be utilized for the purpose of the unsecured creditors and not
workers dues and other dues.
It was contended by the respondent that for the purposes of
Sections 441 and 529A of the Companies Act, the phrase “in
winding up” should refer to “in the course of winding up”. In our
view, this cannot be the position because, if so, no part of the
fixed or movable or any other assets of the Company including
raw material and working capital can be alienated by the
Company in the usual course of its business activities only such
time as the winding up proceedings are permanently stayed. This
would mean that no order could ever be made exploring the
possibility of running the Company as a going concern during the
pendency of the winding up proceedings. Such an interpretation
would not only contrary to the interest of the workers and the
industry as a whole but would not be pragmatic and would be
contrary to long settled practice in the Company jurisdiction.
Many judgments were cited by counsel for the workers’
union. None of the judgments cited on behalf of the workers’
union under Section 11(2) are applicable to the facts of the
present case. These are cases where a dispute arose as to who
had first charge on the assets of the employer which is not at all
the issue arising in the present context. It was argued that the
present petitioners (Niraj Trading Company Group) are
responsible for heavy outstanding which was specifically denied
by learned counsel for the petitioners as most mis-leading and
contrary to the provisions of the scheme itself. Our attention was
also drawn to the findings recorded by learned single Judge that
despite such tall claims, the workers had not been able to provide
proof of the specific details claimed by them. It was stated by
learned single Judge that except for certain bald statements the
objectors did not provide details in support of their allegation. In
our view, dues under the many heads were not to be paid
personally by the Members of the Committee of the Management.
They would be paid out of the funds generated in the course of
carrying on business of the said Company. If anything remained
unpaid, the liability would pass on under the provisions of the
scheme itself to the Committee of Management which replace
them. In the first instance, the Committee of Management was
taken over by the Jain-Jalan Group and it is now alleged that now
it is taken over by Chetan Choudhary. Outstanding liabilities
under the scheme, therefore, remain the liability of the Company
and the subsequent Committees were also required to discharge
their liabilities under the Scheme. In our view, it is a deliberate
attempt here to cast the entire liability under the Scheme on to
the Members of the Committee constituted under the present
petitioners in special leave petition Nos. 6257-58 so that the
subsequent Committees can avoid their responsibilities and
obligations under the scheme. To take one example, if there is
any outstanding amount by way of Provident Fund, the same is
just as such charged on the compensation money realized by the
present Management. The present Management in collusion with
the Union leaders are, therefore, necessitated in projecting that
the outstanding Provident Fund dues, if any, should come out of
the fund lying in the hands of the Registrar, Original side, rather
than out of the compensation money which has been realized by
the present Management at the time of acquisition of the fixed
assets of the Company. It is to be noted that only 25% of the
dues of the petitioner, as unsecured creditors, have been directed
to be released under the orders of the High Court. These dues
relate back to 1987. The present petitioners who were suppliers
of jute to this mill have been unable to realize their dues of 1987
till today whereas all other unsecured creditors have been able to
do so. It is, therefore, just and proper that at least at the present
stage, the dues should not be held back any further.
In any event, it is crystal clear that finding of the Division
Bench of the High Court, that the claim of the appellants have not
been duly adjudicated is erroneous as claim of the appellants
have duly been adjudicated by the Registrar, High Court, Original
Side, with the help of the Chartered Accountant as would be
evident from Certificate dated 15th March, 2004 issued by the
Registrar. Thus, the said order dated 3.3.2004 passed by the
Division Bench as against these appellants is liable to be set
aside.

 

For the foregoing reasons, we hold
1. That the appellants in C.A.Nos. 4101-4103 of
2004 and the petitioners in S.L.P.(C) Nos. 6257
and 6250 of 2004 are entitled for payment as pre-
scheme unsecured creditors in view of the specific
directions given by this Court on 31.3.1994.
2. That the Division Bench was not entitled to direct
readjudication of the claims which were already
adjudicated, contrary to its own orders dated
30.11.1998/1.12.1998.
3. The fund lying with the Registrar, original side,
High Court of Calcutta was specially earmarked
for the pre-scheme unsecured creditors as defined
in the Scheme.
4. Registrar of the High Court is directed to effect
payment immediately to both the creditors.
In the result, C.A.Nos. 4101-4103 of 2004 and S.L.P.) Nos.
6257-6258 of 2004 are allowed and the orders passed by the
Division Bench of the High Court which are impugned in these
appeals and petitions are set aside and the C.A.Nos. 5906 and
5907 of 2004 filed by Barangore Jute Factory and Bengal
Chatkal Mazdoor Union (CITU) shall stand dismissed. However,
there shall be no order as to costs.
It is stated that both the appellants in C.A.Nos. 4101-
4103/2004 and petitioners in S.L.P.)Nos. 6257-6258 of 2004
have already furnished the bank guarantee and have received the
payment upon furnishing the requisite bank guarantee. The
Registrar of the High Court is directed to release the bank
guarantee to the respective parties forthwith.
The Company is directed to pay the other dues such as PF,
ESI, Welfare Fund, arrears of wages, gratuity, bonus etc. to the
workers depending upon the availability of the funds with it.
The appeals and special leave petitions are disposed of
accordingly. No costs.

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