HIGH COURT OF GUJARAT
Gujarat Steel Tube Employees Union & 1
Versus
O.L. of Gujarat Steel Tubes Ltd. (In Liqn.) & 7
K.M. THAKER, J.
CO. APPLICATION NO. 264 OF 2008
CO. PETITION NO. 7 OF 2001
AUGUST 6, 2012
JUDGMENT
COMA/264/2008
(I) Subject and Relief:-
1. The applicant unions “Gujarat Steel Tube Employees Union” and “Gujarat Mazdoor Sabha” (hereinafter referred to as the “applicant unions”) have taken out Judges Summons dated 17.3.2008 which is registered as Company Application No.264 of 2008 under Section 456 (1) of the Companies Act (hereinafter referred to as the “Act”) seeking below mentioned relief and directions:-
“(A) The Hon’ble Court be pleased to direct the official liquidator of M/s. Gujarat Steel Tubes Ltd. to comply with directions and file his reports as per order of this Hon’ble Court in para 14 of the oral order dated 27th September, 2007 passed in Company Application No.444 of 2007 and allied matters and further be pleased to make the order of final disbursement on the basis of such report.
(B)** ** **”
1.1 Heard Mr. Sinha, learned advocate for the applicant union and Mr. Hemang Shah, learned Advocate for the other union and Mr. Baxi, learned advocate for some of the workmen concerned in the proceedings (who claim that certain benefits to which they were entitled are not taken into consideration while calculating the total claim of the workmen) and Ms. Yagnik, learned advocate for official liquidator and Mr. Singhi and Ms. Shah for ICICI i.e. respondent No. 7. Mr. A.C. Gandhi, learned advocate for respondent No. 6. Ms. Lodha, learned advocate for respondents No. 3, 4 and 8.
(II) Factual Backdrop:-
2. The factual background is found in the affidavit dated 17.3.2008 filed in support of the Judges Summons. In the said affidavit the applicant union has stated, inter alia, that:-
“2. The applicants submit that by an order dated 27.12.2001, passed in Company Petition No. 7 of 2001 by this Hon’ble Court, the above named company has been ordered to be wound up and the official liquidator attached to this Hon’ble Court has been appointed as liquidator with all the powers under the provisions of the Companies Act, 1956.
3** ** **
4. That this Hon’ble Court vide its order dated 27.11.2003 passed in OLR No. 87 of 2003 confirmed the sale of all assets and properties except land for Rs. 12.31 Crores and as per the information of the applicant herein, said amount has already been received by the official liquidator.
5** ** **
6. The applicants submit that the applicants had filed company applications seeking disbursement out of the amount realized and last such application was filed which was registered as company application No. 444 of 2007. It is submitted that in the said company application the applicants have submitted the details of the development of winding up proceedings of the present matter till the date of filing said application. The copy of the said application along with all its annexure is annexed herewith and marked as Annexure-A. The applicants crave leave to refer to and rely upon all the submissions and averments made in the said application at the time of hearing.
7. The applicants submit that the said company application No. 444 of 2007, with other company application No. 174 of 2006, 379 of 2007, 438 of 2007, 439 of 2007 and OLR No. 233 of 2007 were heard together and this Hon’ble Court vide oral order dated 27.9.2007 ordered disbursement of Rs. 35 Crores in the ratio of 50:50 amongst the secured creditors and the workers. This Hon’ble Court was further pleased to direct the OL in para 14 of the said oral order to refer the documents which may be produced by all the secured creditors as well as the claim made by the applicant of company application No. 444 of 2007 to the chartered accountant for re-verification and after report received by him, a fresh OLR was directed to be submitted for final disbursement and the said exercise was to be completed within 3 months from the date of receipt of the copy of the order. The copy of the oral orders dated 27.9.2007 is annexed herewith and marked as annexure-B.
8. The applicants submit that the disbursement as directed vide order dated 27.9.2007 has already been made however fact remains that despite more than five months time have been elapsed, no OL report has been filed there by submitting verification report and proposing final disbursement ratio as direction by this Hon’ble Court by order dated 27.9.2007. The applicants submit that upon aforesaid order dated 27.9.2007 having been passed, OL has already provided necessary details including copy of company application No. 444 of 2007 the learned chartered accountant requesting them to reverify the claims and submit report vide letter dated 3.12.2007, copy of the said communication is annexed herewith and marked as annexure-C to this application.”
2.1 In view of the relief prayed for by the applicant union it would be appropriate and relevant, at this stage to take note of the directions passed by the Court in the said order dated 27.9.2007 in Company Application No. 444 of 2007. The directions read thus:
“10. Considering the aforesaid facts and circumstances and keeping in view the earlier order passed by this Court wherein the workers and the secured creditors were disbursed on the ratio of 60:40, I find that there is substantial difference in the claim of the workers as well as the claim of the secured creditors if the figures as finalized by the Chartered Accountant and mentioned in the OL Report are considered, keeping in view the claim made by the workers and the secured creditors.
11. Ultimately, it will be for the OL to refer the matter to the Chartered Accountant for reverification in light of the contents of the application being Company Application No. 444 of 2007 and it will be for the concerned Chartered Accountant to reexamine the matter and to give appropriate report. Similarly, even on the claim of the secured creditors, it will be for the concerned secured creditors to produce the proof of debts for prima facie examination by the Chartered Accountant and it will be for the concerned Chartered Accountant to finalize the figures of the outstanding amount of the secured creditors. In my view, such exercise can be completed at later stage. However, as the huge fund is available and no disbursement has taken place after the last disbursement of Rs. 4 crore, substantial amount can be made available for disbursement on adhoc basis. Keeping in view the alleged claim by the workers’ Union and the secured creditors, I find that the amount of Rs. 35 crore may be disbursed on the ratio of 50:50 amongst secured creditors and the workers. The remaining amount may be invested by the OL in a nationalized Bank until the final report, which may be submitted by the Chartered Accountant after verification of the workers’ claim as well as the proof of debts of the secured creditors.
12. So far as the claim made by the applicants of Company Application Nos. 438 and 439 of 2007 are concerned, they pertains to the wages on the basis that the termination was illegal and, therefore, for the present the claim of wages as mentioned in both the applications may be considered by the OL by adding their claim in the dues of the workmen.
13. Hence, it is ordered that the OL shall disburse the amount of Rs. 35 crore in the ratio of 50:50 amongst the secured creditors and the workers. Consequently the amount of Rs. 17.50 crore shall be required to be disbursed to the secured creditors and Rs. 17.50 crore shall be required to be disbursed to the workers. The mode of the disbursement shall be as under:-
(a) It will be required for the secured creditors to produce proof of debts, including the documents which may be required by the OL for prima facie satisfaction of the outstanding dues of the secured creditors. It will also be required for all the secured creditors to nominate the lead Secured Creditor, which is stated as that of Bank of Baroda and it will be required for the Bank of Baroda to produce the authority letters of other remaining Secured Creditors together with the details of, inter se, ratio amongst them. Further all secured creditors will be required to file an usual undertaking to this Court, copy whereof shall be produced before the OL, to the effect that in the event it is so directed by this Court, the amount shall be returned or refunded within the time, as may be ordered by this Court.
(b) After the aforesaid formality is completed, OL shall disburse the amount to the lead secured creditor within two weeks from the completion of such formality.
(c) As regards disbursement to the workers are concerned, OL shall be at liberty to make disbursement by opening a separate Dividend Account and the payment by cheque shall be given by the OL to the concerned workers on production of proof of their identity. It will not be required for the OL to insist that the workmen concerned must be present with the representative of the Union only. The OL may take assistance of the workers’ Union. No payment shall be withheld by the OL to any worker, merely because he/she is resisted/opposed by the Union for one reason or another and if the OL is satisfied with the identity of the person concerned, he shall be at liberty to make payment. At the time of disbursement the claim made by the applicants of Company Application Nos. 438 and 439 of 2007 shall be considered in the workmen’s dues for proportionate payment to the concerned applicants. The aforesaid process shall be completed on or before 26th October, 2007.
14. The OL shall refer the documents, which may be produced by all the Secured Creditors as well as the claim made by the applicant(s) of Company Application No. 444/2007 to the Chartered Accountant for reverification and after the report is received by him, a fresh OLR shall be submitted for final disbursement of the amount. The aforesaid exercise shall be completed with a period of three months from the date of receipt of the order.”
2.2 Before proceeding further, it is relevant to note that according to Official Liquidator all properties and assets have been disposed of and now there are no more assets and properties of the company available for sale/disposal and total sum of Rs. 12,85,33,258/- is available with Official Liquidator for disbursement amongst the workers and the secured creditors.
2.3 It appears that there is a common grievance from the side of secured creditors as well as unions representing workers that the reports by the chartered accountant give out conflicting and contradicting conclusions and recommendations.
2.4 It appears that on earlier occasions Official Liquidator had placed on record chartered accountant’s reports dated 8.9.2004, 13.1.2007, 3.2.2007 and 24.2.2007.
2.5 Subsequently order dated 6.3.2007 was passed in Company Application No. 174 of 2006 directing the Official Liquidator to get the claims reverified. The relevant portion of the said order dated 6.3.2007 reads thus:-
“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 hereinabove 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.”
2.6 In pursuance of the said order dated 6.3.2007, the Chartered Accountant M/s. Kiran Shah and associates submitted a report dated 12.8.2007 (at page 107 to 149).
2.7 After the above referred report dated 12.8.2007 submitted by the Chartered Accountant was placed on record, the applicant union preferred application No. 444 of 2007. It appears that the said application was filed in September 2007. In the said application the applicant union placed on record a statement giving out the details of the claimants/workers and the individual and total claim amount. According to the said statement the total number of claimants/workmen was 1117 and the total claim amount was Rs. 46,13,54,855. In the said application the Court passed an order dated 27.9.2007 wherein, the Court inter alia, directed that the Official Liquidator should refer the documents which may be submitted by secured creditors and the workmen and forward all such documents to chartered accountant for re-verification and after the report from the chartered accountant is received, fresh report should be submitted by the Official Liquidator.
2.8 The effect of the said directions by order dated 27.9.2007 would be that all other/previous reports would not be relevant for any purpose and the report which the Chartered Accountant may submit after taking into account the directions contained in the order dated 27.9.2007 would be the relevant report. By the said order the Court directed that the calculation of the claims by the workmen should be undertaken in light of the judgment by the learned Single Judge in case of Textile Labour Association v. Official Liquidator of Jubilee Mills Ltd. [2000] 99 Comp. Cas. 189 (Guj.) and to consider claims of all workmen irrespective of any age limit and of the staff members drawing wages not exceeding Rs. 2000/-.
2.9 It was in pursuance of the said order that the chartered accountant forwarded a communication dated 11.3.2008 purporting to be part report which was followed by his letters dated 6.6.2008 (addressed to the secured creditors) and further communication/report dated 18.7.2008 wherein the chartered accountant suggested the claim ratio for the secured creditors (which, even according to the said charted accountant, was incomplete). About a month thereafter the said Chartered Accountant called for certain instructions from official liquidator.
2.10 In this background a company application came to be filed (i.e. company application No. 584 of 2008) wherein the Court passed order dated 18.11.2008 directing re-verification of all claims by another Chartered Accountant.
2.11 Consequently, official liquidator appointed another Chartered Accountant and assigned him the work of re-verification of all claims.
2.12 The Chartered Accountant appointed by official liquidator after the order dated 18.11.2008 submitted his reports in two parts viz. report dated 10.1.2009 about the claims by the workmen and report dated 17.2.2009 about the claims by the secured creditors. Official liquidator placed the said two reports dated 10.1.2009 and 17.2.2009 on record under his reports dated 27.1.2009 and 18.2.2009. The report dated 10.1.2009 submitted by the Chartered Accountant contained two annexures. One of the two annexures i.e. annexure-A contained details related to workmen and another annexure i.e. annexure-B contained details related to members of staff. According to the said report total eligible claim from the side of workmen was identified at Rs. 38,70,19,269 and for the staff members at Rs. 14,13,47,503/- (i.e. total Rs. 52,83,66,772/-) and it included diverse heads like basic wage, Variable Dearness Allowance (“VDA”, for short), Earned Leave, Gratuity and retrenchment compensation. So as to explain as to how the details were calculated and the claims were identified and determined the Chartered Accountant clarified in his report that he had taken into account the orders dated 6.3.2007, 27.9.2007 and 18.11.2008 and the judgment in the case of Official Liquidator of Jubilee Mills Ltd. (supra). The report also clarified that the total amount for eligible claim (for workmen) was calculated by taking into account the date of order of winding up i.e. dated 27.12.2001 and also the details about date of birth, date of joining, leave record, salary slips for the month of April 1997, of the concerned workmen for the purpose of preparing the report.
2.13 After the submission of the said reports the said Chartered Accountant also submitted another report dated 14.3.2009 giving details/calculation about the ratio of claims (for disbursement) by the secured creditors.
2.14 Since some grievance with reference to about 49 workmen was raised, more particularly about their entitlement for allowance @ Rs. 5 in view of the order by Industrial Tribunal, the matter was referred for further clarification/report by the Chartered Accountant and that therefore he submitted supplementary report 15.7.2009 dealing with the aforesaid aspect. As the said aspect resulted into variation in ratio of claims, the Chartered Accountant submitted the details of variations in his report dated 15.7.2009. The said details read thus:-
