The main legal point established in the judgment is that the sale proceeds from a non-functional company should be disbursed following the modality prescribed under the Companies Act, 1956, deeming the security of the Secured Creditor to be subject to a pari passu charge in favor of the Union members.

JUDGMENT :

A.S. CHANDURKAR, J.

1. The question of inter se priority in recovering dues from a company that has become non-functional but has not been wound up arises for adjudication in this writ petition. The Employees’ Union and the Secured Creditor claim to have priority over each other with regard to their respective dues.

2. Khandelwal Tube Mill (for short, hereinafter referred to as ‘the Company’) was engaged in the business of production and sale of steel pipes. It had engaged about 350 employees whose service conditions were governed by the provisions of the Maharashtra Industrial Relations Act, 1946 (for short, hereinafter referred to as ‘the Act of 1946’). Khandelwal Tube Mill Kamgar Sangh (for short, hereinafter referred to as ‘the Union’) is a representative Union under Section 14 of the Act of 1946 representing all employees at the Company. The Company was not regular in paying the wages to its employees on the agreed dates and hence the Union filed Complaint (ULP) No.219 of 1999 in the Industrial Court, Nagpur alleging commission of an unfair labour practise. That complaint was decided on 02.04.2002 and the Company was directed to pay wages to its employees on every 7th and 22nd day of each month. Despite the aforesaid order, the wages were not being paid as directed. The Union therefore approached the State Government for resolving the aforesaid issue. A meeting of representatives of the Union, the Company and the Punjab National Bank (for short, hereinafter referred to as ‘the Secured Creditor’) was held on 24.09.2002. It was agreed that all assets of the Company could be disposed of and from the sale proceeds received, 50% of the same would go to the Secured Creditor and the remaining 50% would be utilized for disbursing the wages of the employees. In accordance with the consensus arrived at, the State Government issued a Government Resolution on 11.10.2002. With a view to implement the said Government Resolution, the Assistant Commissioner of Labour took steps in that regard. The Secured Creditor however was not inclined to act in accordance with the said Government Resolution. In such situation, the Union preferred the present writ petition seeking a writ of mandamus for implementation of the Government Resolution dated 11.10.2002. Another prayer made was for seeking adjudication of an application pending before the Labour Court under Section 33-C(2) of the Industrial Disputes Act, 1947 (for short, hereinafter referred to as ‘the Act of 1947’) in the matter of payment of wages due.

3. On 05.08.2003 Writ Petition No.2243 of 2003 was decided. Various directions were issued by which the Labour Court was directed to decide the application pending before it under Section 33-C(2) of the Act of 1947 for determining the amount due and payable to the employees and thereafter issue certificate under Section 33-C(4) of the Act of 1947 consequent upon such determination. The Collector was directed to recover the amounts under the certificate by keeping in mind the aspect that the employees’ dues would have priority over the claims of the Secured Creditor. The writ petition was accordingly disposed of.

4. The Secured Creditor being aggrieved by the direction to the Collector to bear in mind the priority of the employees’ dues over the claims of the Secured Creditor challenged the same before the Hon’ble Supreme Court. On 05.08.2004 the Hon’ble Supreme Court decided the proceedings in Punjab National Bank Versus Khandelwal Tube Mills Kamgar Sangh & Others, [(2005) 9 SCC 350]. It was held that the conclusion recorded by this Court that the employees’ dues would have priority over the claim of the Secured Creditor was without any discussion and without giving any reasons. It noted that while the Secured Creditor was relying upon the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, hereinafter referred to as ‘the Act of 2002), the Union was relying upon the fact that