JUDGMENT
K.A. Puj, J.
1. This Company Application is filed by Textile
Labour Association and in the Judge’s Summons taken out
by the said Association, a prayer is made seeking
direction to pay an amount of Rs. 5,15,76,953.00 to 607
workmen of the Star of Gujarat Mills Co. Ltd. (In
Liquidation). By way of an interim relief, it is prayed
for that an amount at the rate of 10 per cent of the
amount claimed may be paid to all those workmen.
2. In support of the Judge’s Summons, an Affidavit
is filed by one Mr. Manilal G. Parmar, the Secretary of
the applicant Association wherein it is, inter alia,
stated that by a separate order passed by this Court, the
plant and machinery have been disposed of by the Sale
Committee and an amount of Rs. 1,50,00,000/= has been
realised. It was further stated that the claim of 607
workmen of the Star of Gujarat Mills Co.Ltd (In Liqn.)
has already been lodged with the Official Liquidator. It
was further stated that since the amount of Rs.
1,50,00,000/= was lying with the Official Liquidator and
since the land and building of the said Mills Company
were yet to be sold the amount which was already realised
may be directed to be paid to the workmen towards their
dues. Along with the said Affidavit a report of workers
due payment prepared by one Mr. Nikhil Shah was produced.
3. In response to the above Judge’s Summons, the
Official Liquidator has filed his report on 4-9-2000
stating that he has appointed Mr. R. Choudhary &
Associates, Chartered Accountants to verify the claim of
the workers and after verification by the said Chartered
Accountant the amount was reduced to Rs. 4,89,03,920/=.
He has further submitted that the secured creditors have
not furnished their claims duly verified/certified by
their Chartered Accountants as on the date of winding up,
i.e., 14-6-1999. The Central Bank of India, who is one
of the secured creditors and impleaded as respondent No.2
in the present application has filed its affidavit
through its Senior Manager, on 27-9-2000 stating, inter
alia, that the Central Bank of India had also lent and
advanced sizeable financial assistance to the company in
liquidation and on the date of the winding up of the
company, i.e., 14-6-1999, a sum of Rs. 16,29,43,383/=
was due and payable by the said company to the Bank. It
was further stated that the Bank has already filed an
Original Application No. 279 of 1999 for recovery of Rs.
16,02,04,845.74 ps.in the Debt Recovery Tribunal,
Ahmedabad and the said application is pending before the
D.R.T. It was further stated in the affidavit that the
bank has already incurred a sum of Rs. 7,05,220.37 ps.
towards insurance, security and publication charges which
should be paid to the bank before making distribution of
any payment to any one.
4.Considering the prayer made in the Judge’s
Summons, the Official Liquidator’s Report filed on
4.9.2000 as well as on 22-9-2000 and the affidavit filed
on behalf of Central Bank of India on 27.9.2000, this
Court has passed an order on 19.10.2000 directing the
Official Liquidator to make the payment of Rs. 30 lakhs
to the workmen and for that purpose the Official
Liquidator was further directed to encash the fixed
deposits prematurely to the extent of Rs. 30 lakhs. This
Court has further directed the Liquidator in the said
order to verify the claim of expenditure incurred by the
Central Bank of India and after verification if it was
found that the Bank has spent the said amount, the same
was directed to be paid to the Bank. Pursuant to the
said direction, the Official Liquidator has verified the
claim of expenditure made by the bank and submitted that
the bank’s claim towards expenditure is admissible to the
extent of Rs. 4,36,803/= out of which an amount of Rs.
20,000/= has already been paid. This Court vide its
order dated 21.12.2000 had directed the Official
Liquidator to pay the balance amount of Rs. 4,16,803/= to
the bank towards its claim for expenditure. This court
has further directed the Official Liquidator to make the
payment of Rs. 30 lakhs each to the secured creditors
namely Central Bank of India and IIBI as the workers have
already been paid Rs. 30 lakhs towards their claim for
salary.
5. The Official Liquidator has further filed his
report on 28.6.2001, pursuant to the direction issued by
this Court on 18.6.2001 wherein it is stated that the
Chartered Accountant appointed by the Official Liquidator
has submitted his verification report to the Official
Liquidator vide his letter dated 18.7.2000 to the tune of
Rs. 4,89,83,919.10 ps. It was further stated in the said
report that the bank vide its letter dated 19.1.2001 has
forwarded a reconciliation statement of workers claim
submitted by the Chartered Accountant of the Official
Liquidator and the Chartered Accountant of the bank. It
was further stated by the O.L. in his report that there
was discrepancy as regards the date upto which the debts
were to be calculated and other discrepancies were also
noticed. It was further stated that the Chartered
Accountant of the bank has calculated the claims of
workers as on the date of closure of the said company,
i.e. 28.4.1998 whereas the Chartered Accountant appointed
by the Official Liquidator has calculated the claims of
the workers upto the date of the appointment of Official
Liquidator as Provincial Liquidator, i.e., 14.12.1998.
However in both the reports the calculation of workers’
dues was made on the basis of the strength of 529 workers
as against the strength of 607 workers submitted by the
applicant-association. As per the report of the Chartered
Accountant appointed by the bank, the workers claim was
verified to the tune of Rs. 4,38,73,468.01 ps.
6. The Official Liquidator has further filed his
report on 29th October 2001 stating, inter alia, that
pursuant to the direction issued by this Court, the
Official Liquidator has appointed M/s. R. Choudhary &
Associates, a firm of Chartered Accountants for the
purpose of fixing ratio amongst the secured creditors and
the workers of the said Mills Company. The said firm of
Chartered Accountants vide its letter dated 29.10.2001
has submitted its report with the Official Liquidator as
per the details given in the said report as under:-
Institution As per C.A. of As per C.A.
Central Bank of appointed by Offi-
India cial Liquidator.
1.Central Bank 58.21% 57.17%
of India.
2.I.I.B.I. 23.48% 23.06%
3.G.I.I.C. 2.37% 2.33%
4.Textile Labour 15.94% 17.44%
Association.
100.00% 100.00%
The Official Liquidator has further submitted in the
report that he was having a sum of Rs. 1,17,39,265/= out
of which certain amounts towards payment to the security
agencies, Official Liquidator’s commission and tax
liabilities etc., were required to be retained by him
and an amount of Rs. 1,00,00,000/= could be distributed
amongst the secured creditors as well as the workers.
7. Central Bank of India, the respondent No.2 herein
has filed further affidavit-in-reply on the report
submitted by the Official Liquidator on 29.10.2001
wherein it is stated that the ratio determined by M/s.
R. Choudhary & Associates, which was adopted by the
Official Liquidator was not correct. It was submitted
that the Bank has caused detailed searches of the said
company’s file with the R.O.C. and it was found that no
charges in favour of GIIC have been shown to have been
registered and hence the Central Bank of India as well as
IIBI are the only secured creditors and that the GIIC was
not entitled to any priority to receive any amount out of
the sale realisation of the assets of the above company.
It was further stated that GIIC has not produced any
cogent and satisfactory documentary evidence in support
of its entitlement to any priority to receive amount.
8. Industrial Investment Bank of India Ltd., the
respondent No.3 herein has also filed its
affidavit-in-reply on 5th December 2001 raising a dispute
with regard to the actual number of workers entitled to
claim dues as per Section 529 and 529A of the Companies
Act, 1956. It was stated that as per the report of the
Official Liquidator, the claim of 607 workers amounted to
Rs. 4,89,03,919.10 ps. Based on the said claim the
ratio as calculated by the Chartered Accountants came to
17.44% of the total amount to be distributed from
realisation of assets of the Mills Company as per the
provisions of Section 529 and 529A of the Act. It was
further submitted that the total number of 607 workers as
claimed by the Textile Labour Association was not at all
verified by the Official Liquidator and Chartered
Accountants and without any application of mind
mechanically calculated the claim and ratio for the
purpose of pari passu distribution between secured
creditors and the workers. It was further submitted that
the Board for Industrial & Financial Reconstruction, by
consent of all the secured creditors and workers of the
Mills Company in liquidation had sanctioned scheme of
rehabilitation, in exercise of powers conferred under
Section 18(4) read with Section 19(3) of the Sick
Industrial Companies (Special Provisions) Act, 1985, on
19th May 1991. As per the said sanctioned scheme in
Clause G, it was agreed between the parties that out of
the total 607 workers and 75 staff, 224 workers and 26
staff would be reduced through Voluntary Retirement
Scheme. Pursuant to the said agreement the Mills Company
in liquidation retrenched a total number of 250 employees
which was specifically and categorically reflected at
Clause 12.4 in an audit report submitted by Ramanlal G.
Shah & Company, Chartered Accountants, dated 28.2.1996.
This audit report was carried out from January 1996 to
March 1996 at the instance of the management of the mills
company in liquidation. It was further submitted that if
the effect was given to the said reduction of
workers/staff members, the total number of workers as on
28.6.1996 stood reduced to 383 workers. It was therefore
submitted that since the mills company went into
liquidation on 14.12.1998 the total number of workers of
the mills in company in liquidation entitled for claiming
pari passu disbursement was only 383 workers and not 607
workers as claimed by the applicant-association. It was
further submitted that the Official Liquidator has not
verified any of the documents and details available with
him and mechanically calculated the workers’ claim
without any application of mind and without discharging
his obligations and duties as specified under the
provisions of the said Act. The respondent No.3 has
therefore urged before the Court that the Official
Liquidator should be directed to pursue all the relevant
documents related to strength of number of workers of the
mills company in liquidation and to file his report
reflecting actual number of workers working and enrolled
on muster roll at the time of winding up of the mills
company in liquidation and entitled to claim disbursement
as per the provisions of Section 529 and 529A of the Act.
9. Since the dispute with regard to the exact number
of workers entitled to pari passu disbursement and the
claim of GIIC as secured creditors was raised before the
Court, this Court has observed in its order dated
14.12.2001 as under;
“……..It is not a matter of dispute
that as per the scheme worked out, earlier 250
workers/members of the staff were to be
retrenched. However, in reality 246
workers/members of the staff were actually
retrenched prior to the winding up of the
company. As per the say of T.L.A., if the total
strength of workers was 607 then in the event of
retrenchment of 246 workers, the actual
claimant-workers would be much less than 482
calculated by the Chartered Accountant of Central
Bank of India. Hence, I am surprised that how
T.L.A. has made a claim of entire set of workers
i.e. all 607, though substantial number of
workers had already got their statutory
retrenchment compensation decided under a scheme.
Exaggerated or false claims evaluated or
calculated without ascertaining correct facts
available on record would affect the ratio and
the entitlement of amount by Financial
Institutions and Secured Creditors and it would
give scope to unauthorised persons to pocket
same. Therefore, to bring the correct set of
facts on record, the Official Liquidator is
directed to submit his report clarifying all
these confused contingency and conflicting
figures on record…..”
10. Pursuant to the directions given in the said
order, the Official Liquidator has filed his report on
8th August 2002 wherein it is stated that M/s. R.
Choudhary & Associates, firm of Chartered Accountants has
clarified the position vide their letter dated 25.3.2002
and as regards the total number of workers as was
submitted by them, the total number of workers’ claim
verified by them for workers eligible for claim was 529
out of 607 workers as proposed by the Textile Labour
Association. It was further stated that the documents
and information provided to them did not show any workers
retrenchment under the voluntary retirement scheme as
claimed by the concurrent audit report dated 23.6.1996.
It was further stated that the Central Bank of India’s
auditor has also confirmed the fact that the variance was
only because of other facts and not for any dispute for
the number of workers. The said auditors have further
submitted that they have verified PF register, attendance
register, payment register, leave encashment register,
leave records etc., and the same was not showing
retrenched workers under Voluntary Retirement Scheme. It
was further stated that the mills company in liquidation
had also appointed many workers after the date of
sanction of the scheme by BIFR on 5-8-1991 and also after
the concurrent audit report dated 23.6.1996 for which the
date of joining of such workers could be verified. The
said auditors have, therefore, reconciled the figure as
under;
No. of workers and staff as on BIFR
Scheme Sanction dated 5/08/91. (606+75) 681
Joined after the 5/08/91. 101
Total : 782
Less: retrenchment as stated in Concurrent
auditor report dated 23/06/1996. – 246
Balance No. of Persons. 536
With regard to discrepancy of Rs. 50 lakhs, it was
submitted by the auditors that the reasons for variance
were basically due to difference in assumption based on
the interpretation of certain important matters
pertaining to period of closure, completed year of
service etc. With regard to ratio, considering the claim
of GIIC as secured creditor, the auditors have observed
that the GIIC was not secured creditor and an alternative
ratio calculation was given by them as under;
AS PER THE CHARTERED ACCOUNTANTS APPOINTED BY OFFICIAL
LIQUIDATOR
Sr. Name of the creditor Amount in Rs. Ratio
01 Central Bank of India 16,02,04,845.74 58.53%
02 IIBI 6,46,23,683.00 23.61%
03 Textile Labour Association 4,88,84,586.06 17.86%
Total 27,37,13,114.80 100.00%
AS PER THE CHARTERED ACCOUNTANTS APPOINTED BY CENTRAL
BANK OF INDIA
Sr. Name of the creditor Amount in Rs. Ratio
01 Central Bank of India 16,02,04,845.74 59.62%
02 IIBI 6,46,23,683.00 24.05%
03 Textile Labour Association 4,38,73,468.01 16.33%
Total 26,87,01,996.75 100.00%
The IIBI, respondent No.3 herein, however, submitted vide
their letter dated 10.7.2002 that in terms of the
Rehabilitation Scheme approved by BIFR, the management
had paid retrenchment compensation to 250 workers out of
607 workers and did not have any authority to absorb 105
workers thereafter. It was therefore submitted by them
that it would be necessary to ask the erstwhile
management to explain this lapse and that Central Bank of
India’s dues in respect of WCTC 1 and 2 and
rehabilitation term loan are secured by pari passu term
loan, i.e., first charge on the fixed assets of the
company.
11. Heard Mr. DS Vasavada, ld. advocate appearing
for the applicant-association, Mr. Panesar, ld.
advocate appearing for the Central Bank of India, Mr.
Sandeep Singhi, ld. advocate appearing for IIBI, and Mr.
Roshan Desai, ld. advocate appearing for GIIC. Mr.
Vasavada has vehemently argued that in support of the
applicant’s claim he has furnished a detailed report
showing the names of 607 workers and making the claim of
Rs.5,15,76,953. The ratio should be worked out on the
basis of 607 workers and not on the basis of 529 workers
as determined by the Chartered Accountants appointed by
the Official Liquidator as well as by the Central Bank of
India. He has further submitted that the claim of the
workers should not be reduced as suggested either by the
Chartered Accountant appointed by the Official Liquidator
or by the Chartered Accountant appointed by the Central
Bank of India. Mr. Sandeep Singhi and Mr. RM Desai,
the ld. advocates appearing for respondents No. 3 and 4
respectively have, however, objected to the claim made by
the applicant-association. It is submitted that even as
per the report of workers due payment prepared by Mr.
Nikhil Shah and produced by the applicant-association
does not contain the details of the workmen listed at
Serial No. 540 to 607. Even with regard to the workers
listed at Serial Nos. 528, 532, 534, 535, 536,537, 538
and 539, it is found that they were appointed subsequent
to the claim sanctioned by BIFR. Mr. Singhi has
therefore submitted that the ex-management had no right
to appoint these workmen and no claim can be entertained
in respect of these workers. It is further submitted
that initially there was difference with regard to the
number of workers in the report prepared by the Chartered
Accountant appointed by the Official Liquidator as well
as by the Chartered Accountant appointed by the Central
Bank of India. The reconciliation made also did not give
any clear picture about the exact number of workers, as
in the said reconciliation, the initial strength of
workers was considered as 681 which includes the 75 staff
members. He has submitted that the claim of these staff
members should not be considered while determining the
ratio. Even in this reconciliation, the balance number
of persons was shown as 536. In view of these
discrepancies in the strength of workers, Mr. Singhi has
submitted that no order with regard to the determination
of the ratio amongst the workmen and secured creditors
can be made and that the Official Liquidator as well as
the ex-management of the company in liquidation should be
directed to verify about the exact number of workers and
thereafter the further order with regard to determination
of ratio as well as disbursement of the amount can be
passed.
12. I have heard the learned advocates appearing for
the respective parties at length and I have also gone
through the Company Application, Report filed by the
O.L., as well as the Affidavits-in-Reply filed by the
respondents. I have also perused the three different
reports prepared at the behest of the
applicant-association, the Official Liquidator as well as
the Central Bank of India. One thing is very clear that
the claim put forward by the applicant-association on the
basis of the strength of 607 workmen cannot be
entertained and accepted as the necessary details are not
there even in the report prepared at the behest of the
applicant-association. The first and foremost question
which is left for determination to this Court is as to
whether the strength of workmen was 529 or even less than
that. The another question, which is required to be
decided, is as to whether the applicant-association’s
claim seeking direction to pay an amount of Rs.
5,15,76,953/= to the workmen of the Mills Company can be
adjudicated and decided at this juncture, as at present
there is nothing on record to show that the entire assets
of the Mills Company in liquidation have been sold. On
going through the record submitted by the Official
Liquidator, it is found that the plant and machineries
and other movable assets of the company were sold and an
amount of Rs. 1,50,05,000/= was realised by the Official
Liquidator. Out of this amount, under the order of this
Court, Rs. 30 lakhs each were disbursed in favour of the
applicant-association, Central Bank of India, and IIBI.
The balance amount was required by the Official
Liquidator towards expenses and Liquidator’s commission
etc. Hence, no further amount is required to be
disbursed at present. The question of other disbursement
would arise only when the immovable properties of the
Mills Company in liquidation are sold. It is, therefore,
in the fitness of things that the correct strength of the
workers is required to be ascertained by collecting
certain further details. The Official Liquidator is,
therefore, directed to ascertain from the ex-management
with regard to the workmen who were already retrenched as
observed by M/s. Ramanlal G. Shah & Company, Chartered
Accountants, in their Report dated June 20, 1996. The
Official Liquidator is further directed to call for the
explanation from the ex-management as to under which
authority 101 persons were appointed by them after the
Rehabilitation Scheme sanctioned by BIFR. It is open for
the Official Liquidator to call for this information
either from the ex-management or from M/s. Ramanlal G.
Shah & Company, Chartered Accountant who has pointed out
this fact in their Report or from IIBI, Ahmedabad Branch
Office, Ahmedabad to whom the concerned audit report was
forwarded by the auditor. After undergoing this
exercise, the Official Liquidator is directed to file a
fresh report before the Court. As far as the claim of
GIIC is concerned, at present there is nothing on record
to show that the proper charge has been registered in
favour of the GIIC. The Official Liquidator is,
therefore, directed to call for the necessary details
from GIIC. The ratio can be determined thereafter on the
basis of this fresh information which would be received
by the Official Liquidator.
13. With the aforesaid directions, the present
Company Application is accordingly disposed with no order
as to costs.
rmr. [ K.A. Puj, J. ]
After the above judgment is pronounced Mr.Buch
learned advocate appearing for Singhi & Buch Associates
for respondent no.3 submits that the Hon’ble Court has
observed in the judgment that the balance amount was
required by the Official Liquidator towards expenses and
Liquidator’s Commission etc. As a matter of fact, the
Liquidator has made the claim regarding the Liquidator’s
Commission in his report, however, no such claim is
adjudicated and hence this observation would create some
difficulties in future. Having heard the learned
advocate and having perused the judgement, I am of the
view that the Liquidator can move appropriate application
for claiming the Liquidator’s Commission. The present
order is passed only with regard to non-disbursement of
the balance amount lying with the Liquidator. Hence the
balance amount or any part thereof cannot be treated as
the amount appropriated towards the Liquidator’s
Commission. The Court will consider the said claim as
and when proper application is made and order of final
disbursement would be passed by the Court.