Companies Act Case Law Textile Labour Association & Anr Vs The Official Liquidator & Anr

Review Petition (civil) 1193-1203 of 2001

Textile Labour Association & Anr.

The Official Liquidator & Anr.

DATE OF JUDGMENT: 12/04/2004




I.A. NOS. 168-178 OF 1997


CIVIL APPEAL NO. 8530-40 OF 1983


This Court in a set of appeals arising out of certain
orders made in a batch of writ petitions by a Division
Bench of High Court of Gujarat in Association of
Natural Gas Consuming Industries & Ors. vs. Oil
and Natural Gas Commission & Anr., (1983) 24 (2)
Gujarat Law Reports 1437, examined various aspects of
the matter in relation to price fixation and upheld the
prices fixed by the appellant and allowed the appeals.
However, during the pendency of the appeals in this
Court, the interim orders granted by the High Court
continued to be in operation and the respondents
received gas at Rs.1000/- per 1000M3.

In I.A. No. 168-178 of 1997 filed by the Official
Liquidator appointed in respect of Ambica Mills Ltd. in
Civil Appeal No. 8540-40 of 1983, this Court on
17.10.1997 held as under :-

“All that is necessary to be said is that out of
the assets of the company under liquidation,
the dues of ONGC Ltd., are required to be
paid off first and the question of making any
payment to any other creditor can arise only
out of the surplus, if any, remaining after the
full dues of the ONGC Ltd. have been paid
off. The High Court is, therefore, to proceed
with the matter in this manner. I.As stand
disposed of.”

The petitioners in these review petitions contend
that an application had been made before the High
Court of Gujarat in Company Application No. 143 of
1997 in Company Petition No. 121 in which the High
Court directed that the Official Liquidator should make
an application before this Court after impleading the
company concerned; that pursuant thereto, he filed
an application No. 168-178 seeking for permission to
sell the immovable properties of the Company and to
disburse the sale proceeds in accordance with law;
that to this application none of the Unions of the
workmen or other workmen were impleaded as
respondents nor did the Official Liquidator in course of
his application raised any pleading regarding the
priority of disbursement of sale proceeds or application
of Sections 529 and 529-A of the Companies Act; that
Petitioner No. 1 before us is a labour Association
representing the workmen of Shri Ambica Mills Ltd. and
petitioner No. 2 is labour Union representing the
workmen of Ambica Tubes, a division of Shri Ambica
Mills Ltd.; that the workmen of these two
establishments have not received wages and
employment benefits amounting to more than Rs. 40
crores by their employer Shri Ambica Mills; that on
15.4.1987 this Court had directed ONGC to supply gas
to its consumers subject to the undertaking that they
would not charge, encumber or alienate any of their
immovable assets without the leave of this Court; that
Company Petition No. 66 of 1988 was filed for winding
up of Shri Ambica Mills Ltd.; that, however, during the
pendency of this petition, a reference under the Sick
Industrial Companies (Special Provisions) Act, 1985
was filed before the Board for Industrial and Financial
Reconstruction (‘BIFR’ for short); that BIFR forwarded
its opinion to this Court under Section 20 of the Sick
Industrial Companies (Special Provisions) Act, 1985 to
the effect that it was just and equitable that the
company should be wound up; that the opinion of BIFR
was registered as Company Petition No. 121 of 1995
and winding up order came to be passed on 17.1.1997
on Company Petition No. 66 of 1998 with Petition No.
121 of 1995 and others. The petitioners made claim of
the outstanding dues of the workmen of Shri Ambica
Mills and the Official Liquidator in this regard
communicated to the petitioners that he does not have
any funds at his disposal and even if the amounts are
realised out of sale of the assets he would not be in a
position to make any payment to anybody including the
workmen, except ONGC in view of the order made by
this Court in I.A. No. 168-178 in C.A. No. 8530-40 of
1983. Similar letter was also sent to Vatva Industries
Mazdoor Sabha on 12.8.1989. The Textile Labour
Association received that letter on 6.9.1999. It is only
on coming to know from the Official Liquidator that the
workmen who are members of the petitioners’
association would not be able to get their dues, they
sought for intervention in the matter.

The basic submission made before us is that the
review petitioners were not parties to the proceedings
before this Court and on the passing of the winding up
order on 17.1.1997 the provisions of the Companies
Act will come into force and will be effective in the light
of the decisions of this Court in UCO Bank vs. Official
Liquidator, High Court, bombay & Anr., 1994 (5)
SCC 1; Industrial Credit and Investment
Corporation of India Ltd. vs. Srinivas Agencies &
Ors., 1996 (4) SCC 165; Allahabad Bank vs.
Canara Bank & Anr., 2000 (4) SCC 406, and A.P.
State Financial Corporation vs. Official Liquidator,
2000 (7) SCC 291.

Shri Raju Ramachandran, learned Additional
Solicitor General appearing for ONGC in these review
petitions, submitted that there is inordinate delay on
the part of the review petitioners in approaching this
Court and, therefore, this Court should recall its order
condoning the delay in filing the review petitions. In
this context, it is contended that the review petitioners
were aware of the proceedings pending before this
Court in the company proceedings in which they sought
for their participation and the High Court had directed
them to take appropriate steps in this Court and they
did not do so till October, 1999 and they filed review
application only in August 2001; that, therefore, these
review petitions are not filed with due diligence.

It is clear from the records that the order made by
the High Court of Gujarat in Company Application No.
193/95 had been filed by Vatva Industries Mazdoor
Sabha. The Textile Association were not made a party
in these proceedings. No notice was given to them. The
Textile Association is a separate union of workmen and
had no knowledge of the proceedings with the High
Court of Gujarat in relation to Shri Ambica Mills filed by
Vatva Industries Mazdoor Sabha. The participation of
the Vatva Industries Mazdoor Sabha in the High Court
of Gujarat was only for the purpose of disbursement of
amounts realised from the sale of the finished products
and for payment of wages since September 1994 and
bonus for 1994-95. It is in these circumstances, it is
stated that a direction had been issued by the High
Court of Gujarat to the Official Liquidator to make an
application for impleading necessary parties and to
furnishing copies to them and the Official Liquidator did
not implead any of these parties. Therefore, no
negligence can be attributed to the writ petitioners in
these cases and, therefore, the order made condoning
the delay does not require any reconsideration.

It is next contended that inasmuch as mandamus
had been issued by this Court as to priority of claims in
the matter of payment that mandamus will prevail over
any law. This Court examined the plenary powers of
this Court arising under Article 142 of the Constitution
of India in Supreme Court Bar Association vs.
Union of India & Anr., 1998 (4) SCC 409 and held
that ‘this Court in exercise of its power under Article
142 cannot ignore any substantive statutory provision
dealing with the subject and it is only a residury power,
supplementary and complementary to the powers
specifically conferred on this Court by statutes
exercisable to do complete justice between the parties
wherever it is just and equitable to do so. It is
intended to prevent any obstruction to the stream of
justice’. Though the order of this Court in respect of
which review is sought for may be read as having been
made pursuant to exercise of powers under Article 142
of the Constitution, still the same will have to be read
in the light of the decision of this Court Supreme
Court Bar Association vs. Union of India & Anr.
The effect of Sections 529 and 529A is that the
workmen of the company become secured creditors by
operation of law to the extent of the workmen’s dues
provided there exists secured creditor by contract. If
there is no secured creditor then the workmen of the
company become unsecured preferential creditors
under Section 529A to the extent of the workmen dues.
The purpose of Section 529A is to ensure that the
workmen should not be deprived of their legitimate
claims in the event of the liquidation of the company
and the assets of the company would remain charged
for the payment of the workers’ dues and such charge
will be pari passu with the charge of the secured
creditors. There is no other statutory provision
overriding the claim of the secured creditors except
Section 529A. This Section overrides preferential
claims under Section 530 also. Under Section 529A
the dues of the workers and debts due to the secured
creditors are to be treated pari passu and have to be
treated as prior to all other dues.

Therefore, the law is clear on the matter as held in
UCO Bank’s case that Section 529A will override all
other claims of other creditors even where a decree has
been passed by a court.

Therefore, claims, if any, of ONGC will have to be
worked out in accordance with Sections 529 and 529A
of the Companies Act as well. The contention advanced
on behalf of ONGC by Shri Raju Ramachandran that if a
mandamus had been issued, it will prevail over any law
is not tenable and is rejected.

In the result, we make it clear that order made by
this Court on 17.10.1997 in I.A.No. 168-178/1997 in
Civil Appeal No. 8530-40/1983 will have to be read
subject to provisions of Sections 529 and 529A of the
Companies Act.

The review petitions stand allowed in the manner
stated above.



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