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Gujarat Steel Tube Kamdar … vs O.L. Of Gujarat Steel Tubes Ltd. … on 6 March, 2007

Gujarat High Court
Gujarat Steel Tube Kamdar … vs O.L. Of Gujarat Steel Tubes Ltd. … on 6 March, 2007
Author: M Shah
Bench: M Shah


JUDGMENT

M.R. Shah, J.

1. As all these applications are by the respective workers’ union for and on behalf of the workmen of Gujarat Steel Tubes Ltd. (in lqn) and raise common question of law and facts, they are being disposed of by this common judgment and order.

2. Company Application No. 174 of 2006 is filed by the Gujarat Steel Tubes Kamdar Suraksha Samiti for an appropriate order directing the Official Liquidator of Gujarat Steel Tubes Ltd. to make final payment to each of the workman of the applicant union towards their legal dues by considering the report submitted by the Chartered Accountant out of the amount of Rs. 8.31 crores and Rs. 42.10 crores received from the sale of the plant, machineries and land. Company Application No. 259 of 2006 has been filed by the applicant of Company Application No. 174 of 2006 to permit the applicant to join the secured creditors as necessary party in Company Application No. 174 of 2006.

Company Application No. 408 of 2006 is also filed by the Gujarat Steel Tubes Kamdar Suraksha Samiti for an appropriate order to allow the Official Liquidator’s further report submitted in Company Application No. 362 of 2004 and Company Application No. 375 of 2004 and pay entire dues in favour of 12 workmen of the applicant union.

Company Application No. 232 of 2005 is filed by the Gujarat Steel Employees’ union and Gujarat Mazdoor Sabha for an appropriate order holding that the members of the applicant union are entitled to the entire amount of Rs. 58,37,77,872/- as admissible claims and have priority above all other creditors including secured creditors. It is also further prayed for an appropriate order directing the Official Liquidator of M/s Gujarat Steel Tubes Ltd. to disburse the amount of Rs. 58,37,77,872/- amongst the workers claimed whose claims are pending with the Official Liquidator, from the amount realized from the sale of the plant, machineries, building and land.

Company Application No. 233 of 2005 is filed by the Gujarat Steel Tubes Kamdar Suraksha Samiti for an appropriate order directing the Official Liquidator of the company in liquidation to make available the amount of Rs. 1,58,000/- to each workman of the applicant union towards their legal dues out of the amount of Rs. 29 crores and odd crores and interest thereon accrued from the sale of the plant and machineries. Thus, by and large in all the aforesaid applications, the respective unions for and on behalf of the workmen of the company in liquidation have prayed for an appropriate order directing the Official Liquidator to disburse the amount to the workers towards their dues out of the amount which is realized by selling the properties of the company in liquidation.

3. Few facts and little history is required to be considered. Earlier, Gujarat Steel Tubes Employees’ Union and another preferred various applications raising common issue claiming exclusive right by the workmen under Section 529-A of the Companies Act, 1956 (hereinafter referred to as the Act) of satisfaction of their dues prior to the right of any other Creditors either Secured or Unsecured. In the said applications, a similar prayer was made to make payment to the respective workers of the company in liquidation and to disburse the amount realized from the sale of the plant, machineries and the assets of the company in liquidation. That pursuant to the various orders passed by this Court, the claims of the respective workmen were sent to the Chartered Accountant for its re-verification and the Chartered Accountant also submitted his report. That against the report of the Chartered Accountant, objections were raised by the Bank of Baroda one of the secured creditors. Some of the applications came to be disposed of by this Hon’ble Court (Coram: K.A. Puj, J.) by its judgment and order dated 9-1-2006 reported in 2006(131) Company Cases 410 (Guj) and the learned single Judge held that the claim made by the union in the applications with regard to their exclusive right of satisfaction of their claim out of the sale proceeds of the assets of the company in liquidation in priority to all other creditors secured as well as unsecured is not tenable. This Court also further held and observed that simply because the secured creditors participated in the sale proceedings undertaken by the Court and they also became the members of the sale committee constituted pursuant to the direction issued by the Court does not mean that they have exercised their option of remaining outside the winding up and they have relinquished their security. This Court also further held that the ratio between the secured creditors and the workmen will have to be determined and the distribution will take place as per the ratio so decided or determined. Various objections were raised on behalf of the secured creditors to the report submitted by the Chartered Accountant. It was submitted in the affidavit filed on behalf of the Bank of Baroda that the claim of the workers’ union is excessive and inflated includes items which are not admissible in law and in view of the guidelines laid down by this Court in the case of Textile Labour Association v. Official Liquidator of Jubilee Mills Ltd. reported in 2000(99) Company Case 189 (hereinafter referred to as Sthe Jubilee Mills case), it was further submitted that the Chartered Accountant, while rightly disallowing certain items like bonus, notice pay and HRA left certain aspects to be determined by the Official Liquidator, who has yet to offer his comments thereon. It was further submitted that the Chartered Accountant has computed the claim of the workmen upto the date of winding up and not up to the date of closure of the company which is not correct in the facts of the case. That the claim of the workmen drawing basic pay above Rs. 2000/- have also been considered while verifying the claim. It was also further submitted that it was necessary to remove the claims of the causal workers while computing the claim of the workmen. It was further submitted that without ascertaining the date of birth of the workmen, the claims of the workmen have been verified, as if it is not possible to know the date of supeannuation without knowing the date of birth. It was submitted that in absence of affidavit of each workman disclosing their date of birth and other lacuna, the report of the Chartered Accountant pertaining to the assessment of the workers’ claim cannot be accepted and the directions were required to be issued to the Official Liquidator to get the claim of the workmen reverified taking into account all the aforesaid aspects. Observing the above objections, the learned Single Judge while disposing of the aforesaid applications directed the Official Liquidator to get the claim of the workers reverified in view of the observations made in the aforesaid order and after submission of the re-verification report of the Chartered Accountant, ratio would be worked out and further order with regard to disbursement will be passed. The aforesaid order of re-verification was passed by the learned single Judge in Company Application Nos. 232 and 233 of 2005.

4. It appears that thereafter, the Official Liquidator got the claim of the respective workmen reverified by the Chartered Accountant. The Chartered Accountant Shri Kiran Shah and Associates submitted his report dated 13-1-2007. In the report dated 13-1-2007, the Chartered Accountant has observed as under: We have been provided by the office of the Official Liquidators the date of birth of 1015 workers/staff out of 1347 workers/staff of the subject matter company which we have verified with the supporting evidence and accordingly re-worked the claims of 1347 workers/staff. Subsequently members of the Union of the company (lqn) has provided additional list of date of birth of the 64 workers/staff and total 1079 workers/staff details provided for our re-verification of claims. Out of which 48 workers and 13 staff members were considered in separate group 1A, 1SA and S2A respectively on the basis of their superannuation and retired after closure but prior to winding up date. We have considered the age of 58 years as age of superannuation which normally applicable to the workers of private sector and accordingly worked out the date of retirement of each worker/staff and separated workers/staff who retired between the date of closure and the date of winding up of the subject company (lqn) and taken in group 1A, S1A and S2A respectively.

Out of total 1347 workers/staff, we have been provided the date of birth of 1079 workers and remaining 268 workers/staff for which no details of date of birth provided hence we are unable to re-verify their claims and kept as it is. Out of the above 1079 workers/staff, no proof/evidence for the date of birth of the 9 workers/staff provided for our verification.

In Group S1A, Shri Chandresh I Patel Employee No. 1042731 joined the company (in lqn) in the year 1991 and having birth date 07/09/1930 and reached superannuation age in the year 1988 and joined the company after that i.e. in the year 1991 hence your kind office is requested to look into the matter and decide the eligibility of the same staff member for his claim.

In respect of the workman/staff members drawing basis pay more than Rs. 2000/-, we have already separated the staff members drawing more than Rs. 2000/- in group S2 in our earlier report dated 25-3-2005 considering the order of Jubilee Mills. And in respect of ascertainment of casual workers, we are unable to comment on the same in absence of required records.

It appears that the Chartered Accountant has bifurcated the claims of the workers and the staff mainly in two groups and thereafter, there was a sub-classification with regard to claims of the workers and the staff. So far as workers are concerned, they were sub classified in Group 1, 1A, 2, 3 and 4 and so far as staff is concerned, they were sub classified in Group S1, S1A, S2 and S2A. It is also required to be noted that the Chartered Accountant considered the age of 58 years as age of superannuation and accordingly worked out the date of retirement of each workman/staff. That thereafter, a further report was submitted by the Chartered Accountant dated 3-2-2007 and the Chartered Accountant considered the date of superannuation as 60 years. Thus, only change in the report dated 13-1-2007 and 3-2-2007 is with regard to age of superannuation. A further report is also submitted by the Chartered Accountant on 24-2-2007 with regard to some remaining 25 workers/ staff members. Various reports have been submitted by the Official Liquidator and along with the said reports, the Chartered Accountant’s verification report are also submitted. Respective secured creditors have also raised various objections against the verification report of the Chartered Accountant, which will be dealt with hereinafter.

5. Similarly, the workers’ union have also submitted their objections against the verification report of the Chartered Accountant.

6. The respective secured creditors i.e. ICICI Bank Ltd, Indian Overseas Bank and Bank of Baroda have raised following objections against the Chartered Accountant’s report and the claim of the workers;

a) At page 98 of the Company Application No. 232 of 2005, the Chartered Accountant along with his report dated 8-9-2004 has given a summary of the total claims of workers divided into 4 groups, of which Group 3 consists of workers, who have expired/retired after the date of closure i.e. May 1997. The Chartered Accountant has calculated the dues of such workers till the date of winding up i.e. 27-12-2001, whereas actually their claim is required to be calculated only till the date of expiry/retirement and accordingly the workers specified in Group 3 would not be entitled to any amount of retrenchment compensation and therefore, the same is required to be excluded.

b) In the Chartered Accountant’s report dated 8-9-2004, Group 4 consists or workers, who have retired or expired before the date of closure. The Chartered Accountant has not specified as to till what date the claim of such workers are calculated. The claims of such workers are required to be calculated only till the date of expiry/retirement and accordingly the workers specified in Group 3would not be entitled to any amount of retrenchment compensation, as they had retired/expired before the date of closure and therefore, the same is required to be excluded.

c) In the Chartered Accountant’s report dated 8-9-2004, Group S2 consists of claim of employees who are drawing salary of more than Rs. 2000/-. Employees who are drawing salary of more than Rs. 2000/- are not entitled to priority under Section 529 and 529A, as per the judgment of the Gujarat High Court in the matter of Textile Labour Association v. Official Liquidator of Jubilee Mills Ltd and Ors. reported in 2000(4) GLH 386 and shall be entitled to claim only under Section 530 of the Companies Act, 1956 and therefore, the claim of the employees specified in Group S2 is required to be excluded from the total claim of workers.

d) In the Chartered Accountant’s report dated 13-1-2007 filed in Company Application No. 174 of 2006 it is stated that Sout of total 1347 workers/staff, we have been provided with the date of birth of 1079 workers and remaining 268 workers/staff for which no details of date of birth provided hence we are unable to reverify their claims and kept as it is. Out of the above 1079 workers/staff, no proof evidence for the date of birth of 9 workers/staff provided for our verification.

Therefore, the directions given by the Hon’ble Court in para 30 of the order dated 9-1-2006 are not complied with as a specific direction was given to the Official Liquidator to get the claims reverified after ascertaining the date of birth, as it is not possible to know the age of superannuation without knowing the date of birth.

e) In the Chartered Accountant’s re-verification report dated 13-1-2007, Group 1 consists of claims of certain casual workers and employees drawing salary of more than Rs. 2000/- and therefore, their claims are required to be excluded from the total claim of workers.

f) In the Chartered Accountant’s re-verification report dated 13-1-2007, Group 2 consists of workers/ employees at Sr. No. 3 to 9 who draw salary of more than Rs. 2000/- and therefore their claims are required to be excluded from the total claim of the workers.

g) In the Chartered Accountant’s re-verification report dated 13-1-2007, Group 3 consists of workers/ employees at Sr. No. 1 to 4 who draw salary of more than Rs. 2000/- and worker at Sr. No. 5 is a casual worker and therefore, their claims are required to be excluded from the total claim of workers.

h) In the Chartered Accountant’s re-verification report dated 13-1-2007, Group 4 consists of workers/ employees whose designations have not been mentioned and who draw salary of more than Rs. 2000/- and therefore, their claims are required to be excluded.

i) In the Chartered Accountant’s re-verification report dated 13-1-2007, except employees shown at Sr. No. 4,5,42,48 in Group 1A, all other employees draw salary of more than Rs. 2000/-, who are either at a supervisory level or at Managerial level or are programmers, engineers or operators and therefore, their claims are required to be excluded from the total claim of workers.

j) In the Chartered Accountant’s re-verification report dated 13-1-2007, Group S2 consists of Engineers, Supervisors, Operators, etc. who draw salary of more than Rs. 2000/- and therefore, their claims are required to be excluded from the total claim of workers.

k) In the Chartered Accountant’s re-verification report dated 13-1-2007, Group S2-A consists of employees who draw salary of more than Rs. 2000/- and therefore, their claims are required to be excluded from the total claim of workers.

l) In the Chartered Accountant’s report dated 3-2-2007, the claim of the workers are calculated considering the age of superannuation as 60 years instead of 58 years and therefore, the claims are to be calculated considering the age of superannuation as 58 years.

Thus, the main objections on behalf of the secured creditors is with regard to considering the claim of the workmen drawing basic pay of more than Rs. 2000/- under Section 529A of the Act. The learned advocate appearing on behalf of the respective secured creditors have heavily relied upon the decision of Jubilee Mills case.

7. Similarly, the workers’ union have also raised various objections against the verification report of the Chartered Accountant and not allowing the claims on the count of bonus, notice pay for three months, PF contribution. Certain objections have also been raised with respect to the calculation of unpaid wages; calculation of gratuity amount; calculation of retrenchment compensation amount, claim for earned leave amount. It has been submitted on behalf of the workers that for the purpose of priority under Sections 329, 529-A and 530 of the Act, the wages/salary payable to the workmen under Section 529(3)(b)(1) includes not only unpaid wages/salary for the period upto the date of closure, but also for the period of illegal closure.

8. The learned advocates appearing on behalf of the respective secured creditors while relying upon the decision of this Court in Jubilee Mills case have submitted that irrespective of whether a workman and/or staff member/employee, all those persons getting basic salary of more than Rs. 2000/-, their claims are required to be excluded for the purpose of considering their claim while making the payment/disbursing the amount under Section 529A of the Act. It is submitted that only those persons getting basic salary of less than Rs. 2000/- , their claims are required to be considered while making the payment under Section 529A of the Act.

9. Shri Sandip Singhi, learned advocate appearing on behalf of one of the secured creditors has submitted that the contours of controversy before the learned single Judge in the Jubilee Mills case was who are the employees excluded from definition of workmen under Section 529(3)(a)? And to that, according to Shri Singhi this Court has held that with regard to all those employees drawing basic wages exceeding Rs. 2000/- irrespective of whether a person is a workman/staff/employee/staff member, their claims are required to be excluded while considering the claims for making the payment under Section 529A of the Act. It is also further submitted by him that as held by the learned single Judge in Jubilee Mills case, all the employees drawing basic salary of less than Rs. 2000/- would fall within the definition of workmen under the Industrial Dispute Act (for short the ID Act) as required by Sub-section (a) of Section 529(3) of the Act. Shri Singhi has relied upon the following few sentences which are made by the learned single Judge while considering the category (xi) of the employees who are required to be excluded for the grant of benefit under Section 529A the Court finds that working out of such rough and ready formula for finding out as to which employees of textile mills in liquidation would fall within the definition of “workmen” under the I.D. Act as required by Sub-clause (a) of Section 529(3) of the Companies Act would be more conducive to expeditious consideration of the claims for workmen’s dues. Thus, it is submitted on behalf of the respective secured creditors that while submitting the report, the Chartered Accountant has considered the claims of the workers drawing basic salary of more than Rs. 2000/- also and which according to them is contrary to the judgment of this Court in Jubilee Mills case. Over and above, the above main objection, the learned advocates appearing on behalf of the respective secured creditors have also raised the objections with regard to considering the claims of some of the workmen though there is no proof with regard to their date of birth and/or some of them have retired and/or died either prior to the date of closure and/or date of winding up. Therefore, it is submitted that on the basis of the present Chartered Accountant’s verification report, no amount is to be disbursed and the claims of the respective workers are still required to be reverified on the basis of the objections raised by them which are as stated hereinabove.

10. On the other hand, Dr. Mukul Sinha, learned advocate appearing on behalf of the workers has submitted that the decision of this Court in Jubilee Mills case has been misinterpreted and misread. It is submitted by him that in the said case, there was no controversy with regard to claims of the ‘workmen’ drawing basic pay of Rs. 2000/- or more or less. It is submitted by him that the only controversy in the said case was with regard to category (xi) i.e. Administrative Officers and other officers drawing basic wages exceeding Rs. 2000/- and with regard to said category only, the learned single Judge has stated that in a case whether any staff member/employee drawing basic wages not exceeding Rs. 2000/- is required to be considered as a ‘workman’ for the purpose of making the payment under Section 529A of the Act without holding any further inquiry, whether he was performing any managerial duty and/or supervisory duty and with regard to all those Administrative Officers and other officers drawing basic wages exceeding Rs. 2000/-, their claims are required to be excluded outright for making the payment under Section 529A of the Act. It is submitted by him that a ratio laid down by the Court in a judgment is required to be considered in light of the controversy raised and any observation dehors the controversy and/or without their being any lis cannot be considered to be laying down a law. It is submitted that in the case before this Court in Jubilee Mills case, there was no controversy at all with regard to workmen as defined under the provisions of the ID Act and according to him, the only controversy was with regard to category (xi) which is as stated hereinabove. Dr. Sinha has further submitted that as per Section 529(3) of the Act for the purpose of Sections 529, 529A and 530, workmen in relation to company means the employee of the company, being workmen within the meaning of the ID Act, 1947. It is submitted that the workmen is defined under Section 2S of the ID Act. It is therefore, submitted that while considering the claim of the workmen under Section 529A of the Act, a workman falling within the meaning of Section 2(S) of ID Act, 1947 is required to be considered. It is submitted by him that the controversy arise while considering the claim of an employee under Section 530(8) of the Act and Section 530(8)(bb) provides that the Sexpression employee” does not include a workman. Therefore, according to him, even the employee is not defined under the provisions of the ID Act. Therefore, it is submitted that to give a narrow interpretation and to restrict the claims of the workmen who are otherwise workmen under the provisions of the ID Act as well as Section 529(3)(a) of the Act drawing basic salary exceeding Rs. 2000/- would be making the provisions of Section 529(3)(a) of the Act and Section 529A nugatory and/or taking away the right which are available to those persons/workmen. Dr. Sinha has submitted that if such a narrow interpretation is given and the decision of this Court in Jubilee Mills case is interpreted and/or read in the manner in which the secured creditors have submitted, in that case, more than 75 to 80% workmen would be deprived of their claims while making the payment under Section 529A of the Act. Therefore, it is requested to read the decision in Jubilee Mills case in its true perspective and in the light of controversy raised in the said company applications/petitions only. He has also further submitted that the date of superannuation is required to be considered as 60 years and not 58 years, as in all the textile mills in the State of Gujarat, the age of superannuation is considered as 60 years and at no point of time, any of the secured creditors had raised any objection while making the payment to workers earlier in the present case and/or any of other textile mills case. He has also requested to consider the objections with regard to other heads which are reproduced hereinabove and has requested to direct the Chartered Accountant to reverify the claims afresh accordingly.

11. The Official Liquidator has submitted various reports. It is submitted by the Official Liquidator that as observed by the Chartered Accountant, it is not possible for him and/or the Chartered Accountant to give any opinion with regard to excluding the claims of those workmen drawing basic salary exceeding Rs. 2000/-. It is submitted that this is a question of interpretation and a pure question of law and therefore, he has requested to give specific findings and issue direction accordingly. It is also further submitted by him that so far as the age of superannuation is concerned, though the Chartered Accountant has given two reports, one considering the age of superannuation as 58 years and another considering age of superannuation as 60 years, he has requested to consider the age of superannuation as 60 years and requested to issue appropriate directions accordingly.

12. Heard the learned advocates appearing on behalf of the parties.

13. As stated above, the main controversy which has been raised is whether while considering the claim of the workmen at the time of disbursing the amount under Section 529A of the Act, whether the claims of those workmen drawing basic salary of more than Rs. 2000/- is required to be excluded and/or included or not. The learned advocates appearing on behalf of the respective secured creditors have heavily relied upon the decision in Jubilee Mills case. Therefore, the question which is required to be considered by this Court is that a workman drawing basic salary of Rs. 2000/- is required to be excluded while making the payment under Section 529A of the Act, irrespective of whether he will be a workman as per Section 529(3)(a) of the Act.

14. Before dealing with and considering the decision of this Court in Jubilee Mills case, certain provisions under the Companies Act, 1956 as well as ID Act and BIR Act are required to be considered. Relevant provisions which are required to be considered while considering the controversy in question are as under:

Section 529(3): For the purpose of this section, Section 529A and Section 530,-

(a) “workmen”, in relation to a company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947);

(b) “workmen’s dues”, in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:

(i) all wages or salary including wages payable for time or piece-work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947);

(ii)all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution;

(iii)(subject to certain exceptions), all amounts due in respect of any compensation or liability for compensation under the Workmen’s Compensation Act, 1923 in respect of the death or disablement of any workman of the company;

(iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company;

529A. (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company –

(a)workmen’s dues; and

(b) debts due to secured creditors to the extent such debts rank under Clause (c) of the proviso to Sub-section (1) of Section 529 pari passu with such dues,

shall be paid in priority to all other debts.

(2)The debts payable under Clause (a) and Clause (b) of Sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.

530. (1) In a winding up, subject to the provisions of Section 529A, there shall be paid in priority to all other debts –

(a) all revenues, taxes…due from the Company to the Central or State Government or to a local authority at the relevant date….

(b) all wages or salary (including wages payable for time or piece-work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months, next before the relevant date, subject to the limit specified in Sub-section (2);

(c) 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 of resolution;

(d) …

(e) …

(f) all sums due to any employee from a provident fund, a pension fund, a gratuity fund, or any other fund for the welfare of the employees, maintained by the company; and

(g) …

(8) For the purpose of this Section (bb) the expression employee does not include a workman;and]

Section 2(S) of the Id Act reads as under: “Workman” means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operation, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person –

(i)…

(ii)…

(iii) who is employed mainly in a managerial or administrative capacity; or

(iv) who, being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.”] Section 2(13) of the Bombay Industrial Relations Act,

2(13). “employee” means any person (including an apprentice) employed in any industry to do any skilled or unskilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and includes –

(a)…

(b)…

but does not include –

(i) …

(ii) a person who being employed primarily in a managerial administrative or supervisory capacity draws basic pay(excluding allowances) exceeding one thousand rupees per month, and

[The words “one thousand” were substituted for “five hundred” by Gujarat Act No. 22 of 1981.]

(iii) irrespective of the pay drawn, any other person or class of persons employed in any capacity specified in Clause (ii) or in a technical capacity, which the State Government may, by notification in the Official Gazette, specify in this behalf.

15. As stated above, the learned advocates appearing on behalf of the respective secured creditors have heavily relied upon the decision of this Court in Jubilee Mills case in support of their submission and according to them, it is held by this Court that in case of a workman drawing basic salary exceeding Rs. 2000/-, his case is required to be excluded for the purpose of considering the claims and/or making the payment under Section 529A of the Act. Against which, it is the contention on behalf of the workers’ union that such a controversy was not there before this Court in Jubilee Mills case and the only controversy was with regard to Administrative Officers and other officers drawing basic wages exceeding Rs. 2000/-. According to the workers, so far as the workman, this Court has not observed that a workman drawing basic wages exceeding Rs. 2000/-, his case is required to be excluded while making the payment under Section 529 of the Act, though, otherwise he may be a workman as per the Section 2(S) of the ID Act. Therefore, this Court is required to first consider what was the controversy before this Court in Jubilee Mills case.

16. As observed by the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Delhi v. Allied Air Conditioning Corporation (Regd.) SA judgment should be understood in the light of facts of the case and no more should be read into it than what it actually says. It is neither desirable nor permissible to pick out a word or a sentence from the judgment divorced from the context of the question under consideration and treat it to be complete law decided by the Supreme Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Supreme Court.

In the case of Uttaranchal Road Transport Corporation and Ors. v. Mansaram Nainwal , the Hon’ble Supreme Court has observed as under;

A decision is a precedent on its own facts. Each case presents its own features. It is not everything said by a judge while giving judgment that constitutes a precedent. The only thing in a judge’s decision binding a party is the principle upon which the case is decided and for this reason it is important to analyze a decision and isolate from it the ratio decidendi. According to the well settled theory of precedents, every decision contains three basic postulates; (i) findings of material facts, direct and inferential. An inferential finding of fact is the inference which the judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment. The enunciation of the reason or principle on which a question before a Court has been decided is alone binding as a precedent. A case is a precedent and binding for what it explicitly decides and no more. The words used by judges in their judgments are not to be read as if they are words in an Act of Parliament. In Quinn V. Leathem, Earl of Halsbury, L.C. Observed that every every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which are found there are not intended to be exposition of the whole law but governed and qualified by the particulars facts of the case in which such expressions are found and a case is only an authority for what it actually decides.

In the case of Dhodha House v. S.K. Maingi , the Hon’ble Supreme Court has observed as under;

It is well settled that a decision is an authority for what it decides and not what can logically be deduced therefrom.

17. Now considering the decision of this Court in Jubilee Mills case, the controversy before the learned Single Judge was the priority claimed for sums under various heads, such as unpaid wages/ salary for the period of illegal closure; ad hoc interim relief; retrenchment compensation; accrued holiday remuneration; Compensation under the Workmen’s Compensation Act, 1923; gratuity; bonus; notice pay and who are the employees excluded from the definition of workmen under Section 529(3)(a). The controversy which was raised in the said case was whether the Administrative Officers and other officers drawing basic wages exceeding Rs. 2000/- would fall within the exclusion Clause (iv) of the definition of workmen under the ID Act. Thus, the controversy was with regard to excluding the Administrative Officer and other officers drawing basic wages exceeding Rs. 2000/-. The relevant abstract of the said judgment to highlight the controversy which was raised in the said case reads as under:

The controversy whether all the employees of the Company for whom the claims for priority are being made should be given the benefit of ad-hoc distributions from out of sale proceeds of the assets of the Company in liquidation was raised in a few applications filed by the Textile Labour Association earlier. In Company Application No. 159/96 in Company Petition No. 92 of 1993 in the matter of Aruna Mills Ltd. (in liquidation), a formula was evolved for the purpose of being followed in all textile mills where the Textile Labour Association appears as a representative union. As per the formula, the following 11 categories of the employees were excluded for the grant of benefit of ad-hoc distribution:

(i) Manager

(ii) Factory Manager

(iii) Secretary

(iv) Spinning Master/Manager

(v) Weaving Master/Manager

(vi) Processing Master/Manager

(vii) Printing Master/Manager

(viii) Sales Manager

(ix) Sales Executive

(x) Doctor

(xi) Administrative Officers and other Officers drawing the basic wages exceeding Rs. 2000/-.

There can be no controversy for exclusion of the first 9 categories as they would fall under exclusionary Clause (iii) in Section 2(s) of the Industrial Disputes Act. As far as category (x) i.e. Doctor is concerned, there is no claim on behalf of the Textile Labour Association that the said category be included in the definition of workmen. However, there is some scope for controversy regarding category (xi) whether it would fall within the exclusion Clause (iv) of the definition of workmen under the Industrial Disputes Act….

Shri Vasavada, learned advocate appearing for the Textile Labour Association has submitted in the said proceedings that that the figures “one thousand rupees” mentioned in the definition of employee under the Bombay Industrial Relation Act, 1946 were substituted for the words “five hundred rupees” in the year 1981 by the Gujarat Act No. 22 of 1981 and number of employees, whose basic wages were less than Rs. 1000/- as on the date of commencement of the aforesaid Act No. 22 of 1981 were thereafter given higher basic wages between Rs. 1000 and Rs. 2000 in view of the award of the Industrial Tribunal. It was also further submitted by him that none of those categories of employees have been considered to be persons employed in a managerial or administrative or supervisory capacity and, therefore category (xi) i.e. administrative officers and other officers drawing the basic wages exceeding Rs. 2000/- has been evolved to give a practicable workable formula that employees who were drawing basic wages of Rs. 2000/- or less are to be treated as “workmen” under the Industrial Disputes Act without holding any further inquiry.

The learned single Judge in the aforesaid judgment considered the decision of the Hon’ble Supreme Court in the case of National Engineering Industries Ltd. v. Shri Kishar Bhageria ; in the case of Arkal Govind Raj Rao v. Ciba Geigy of India Ltd. and thereafter has observed as under:

Hence, this Court would adopt the definition of “workmen” as worked out by the Textile Labour Association as recorded in the order dated 15.9.1998 in Company Application No. 159 of 1996 whereby only the aforesaid 11 categories of employees are excluded from the definition of “workmen” for the purpose of determining the ratio of workmen’s dues and the dues of the secured creditors of each textile Company in liquidation in the State of Gujarat and for the purposes of payment on priority basis Under Section 529 and 529A of the Companies Act. The Court finds that working out of such rough and ready formula for finding out as to which employees of textile mills in liquidation would fall within the definition of “workmen” under the I.D. Act as required by Sub-clause (a) of Section 529(3) of the Companies Act would be more conducive to expeditious consideration of the claims for workmen’s dues. Otherwise, the entire exercise of working out the dues of workmen running into thousands of employees in each textile mill under liquidation and a large number of textile mills being in liquidation, the process of determining the ratio and ultimate distribution of sale proceeds will be delayed if the Official Liquidator is required to undertake inquiries into the nature of duties and functions of a number of individual employees drawing salary exceeding Rs. 1600/per month. Looking to the fact that the number of employees admittedly falling within the definition of workmen under the I.D. Act is always much larger than the number of employees working in a supervisory capacity and drawing salary in excess of Rs. 1600/- per month, it appears to the Court that in any case adoption of such a rough and ready formula will not significantly alter the ratio of workmen’s dues and the dues of the secured creditors.

18. Considering the above observations of the learned single Judge in Jubilee Mills case, on fair reading of the same, it appears to the Court that the learned single Judge was considering to include the claims of those administrative officers and other officers for the purpose of considering their claims and to treat them as workmen without holding any inquiry to avoid delay to be caused while undertaking the inquiries into the nature of duties and functions of number of individual employees drawing salary exceeding Rs. 1600/- per month and in background of the same, this Court has held that even with regard to the category (xi) i.e. administrative officers and other officers drawing basic wages exceeding Rs. 2000/-, without undertaking any inquiry into the nature of duties and functions of the administrative officers and other officers drawing basic wages not exceeding Rs. 2000/- can be said to be a workman for the purpose of considering their claims while making the payment under Section 529A of the Act. This Court in the said decision has never held that a workman drawing basic wages exceeding Rs. 2000/- will not be entitled to any payment towards their dues while making the payment under Section 529A of the Act. On the contrary, on fair reading of the decision in Jubilee Mills case, it appears that in fact this Court has widened the scope in respect of the employees i.e. administrative officers and other officers and has directed that all employees i.e. administrative officers and other officers drawing basic wages not exceeding Rs. 2000/- are required to be considered as workmen while making the payment under Section 529A of the Act and their claims are required to be included and this Court has further observed that while considering the scope of ‘expression workmen’, the employees i.e. administrative officers and the other officers drawing basic wages exceeding Rs. 2000/- are to be excluded. Under the circumstances and on fair reading of the decision in Jubilee Mills case, the submissions on behalf of the secured creditors that claim of all workmen drawing basic wages exceeding Rs. 2000/- are to be excluded for the purpose of Section 529(3)(a) and 529A of the Act cannot be accepted. Even, otherwise, this Court in Jubilee Mills case had no occasion to consider the said dispute whether workmen drawing basic wages exceeding Rs. 2000/- are to be excluded for the purpose of Section 529(3)(a) of the Act. In fact, such a controversy was not at all there in the said case. To accept the submission on behalf of the secured creditors on the basis of the decision in the Jubilee Mills case that all workmen drawing basic wages exceeding Rs. 2000/- are to be excluded for the purpose of Section 529(3)(a) of the Act would be misreading the decision in Jubilee Mills case.

19. Even, otherwise, it is required to be noted that so far as the provisions of the Companies Act, 1956 are concerned, Section 529A of the Act provides for preferential payment. So far as workmen’s dues and debts due to secured creditors to the extent such debts rank under Clause (c) of the proviso to Sub-section (1) of Section 529 are concerned, the same are required to be paid pari passu amongst the workmen and such secured creditors. As per Section 529(3) for the purpose of Section 529, 529A and Section 530, workmen in relation to company means the employee of the company, being workmen within the meaning of the ID Act, 1947. The workmen is defined under Section 2(S) of the ID Act, which is reproduced hereinabove. Nowhere such a limit of basic wages of Rs. 2000/- has been provided. Irrespective of any wages, an employee/workman falling in Section 2(S) of the ID Act is required to be treated as workmen. Considering Section 529(3)(a) read with Section 2(S) of the ID Act, the claims of the workmen are not required to be restricted only with regard to those workmen drawing basic wages upto Rs. 2000/- only. Such a narrow interpretation would be against the interest of the workmen who are otherwise ‘workmen’ within the meaning of the ID Act.

20. It appears that the dispute has arisen while considering the claims of the employees and the dues of the employees as referred to under Section 530 of the Act and the dispute has arisen because of the proviso to Section 530, more particularly, Section 530(8)(bb) by which it is provided that ‘expression employee’ mentioned in Section 530 does not include a workman. The said explanation and the proviso is with a view to see that the workmen within the meaning of ID Act are not affected and their cases are not required to be considered while considering the claims of other employees while making the payment under Section 530 of the Act. It appears that it is with a view to remove any doubt and the ambiguity and the workmen are in fact not affected, the same is clarificatory in nature and does not in any way taking away any right available to the workmen who are otherwise the workmen within the meaning of the ID Act. Thus, considering the provisions of Section 529(3)(a) and (b) read with the definition of workmen. As per Section 2S of the ID Act, claims of all workmen within the meaning of ID Act, irrespective of any wage limit are required to be considered while making the payment under Section 529A of the Act. Meaning thereby, any workman within the meaning of ID Act drawing basic salary exceeding Rs. 2000/- will also be entitled to the payment pari passu along with other secured creditors as per Section 529A of the Act.

21. In view of the above finding, the Chartered Accountant is now required to reverify the claims of the workers. Thus, now the Chartered Accountant is required to consider the claims of all the workmen who are workmen within the meaning of ID Act irrespective of any wage limit and so far as the staff members i.e. administrative officers and other officers drawing basic wages not exceeding Rs. 2000/-, their claims are required to be considered for the purpose of making the payment under Section 529A of the Act without undertaking any further inquiry into the nature of duties and functions (as held by this Court in Jubilee Mills case).

22. So far as other objections raised on behalf of the secured creditors, such as considering the claims of those workmen who have not produced their age proof and/or birth date certificate; their actual date of retirement and/or superannuation and/or those persons who have died prior to the date of closure, the secured creditors are justified in making the grievance. Thus, before reverifying the claims of the workers as stated above, the Official Liquidator and/or the Chartered Accountant is required to call for such particulars and in fact it is for the concerned workers’ union who have submitted their claims to furnish necessary particulars with regard to date of birth. All those employees whose particulars are not given till date, they are directed to send the said particulars to the Official Liquidator/concerned Chartered Accountant within a period of six weeks from today and Chartered Accountant is directed to have fresh verification of only those workmen who have submitted the proof of date of birth and the Chartered Accountant is required to consider the claims of the concerned workmen accordingly i.e. considering the date of retirement. So far as the objections raised on behalf of the workers’ union under different heads, the Chartered Accountant is required to consider the claims under different heads as per the decision of this Court in Jubilee Mills case. The Official Liquidator and the Chartered Accountant are directed to complete the entire process of fresh verification of the claims of respective workmen in light of the observations made hereiabove within a period of four months from today and thereafter, the Official Liquidator is directed to submit the report before this Court for making necessary payment accordingly. It appears that the amount which is realized by the Official Liquidator/ Sale Committee by selling the properties of the company in liquidation is at present lying idle without fetching any interest. Under the circumstances, the Official Liquidator is directed to invest the entire amount realized by selling the properties of the company in liquidation in a fixed deposit in nationalized bank initially for a period of six months.

23. With these, all these applications are disposed of. No costs.

FURTHER ORDER

At this stage, learned advocate appearing on behalf of one of the secured creditor has prayed to stay the implementation and operation of the present judgment and order for a further period of 4 weeks. Considering the fact that this Court has only clarified what was the dispute before the Learned Single Judge in Jubilee Mills case and also considering the fact that the workers are waiting for their dues since long after the closure of the company and order of winding up, the present judgment and order is not required to be stayed. However, in the facts and circumstances of the case, more particularly, even as per the direction issued by this Court, the Chartered Accountant is required to reverify the claims of the respondent workers as per the directions issued in this order, which is likely to take some time, the prayer to stay is rejected and by not granting the stay, no prejudice is likely to be caused to the secured creditors.

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