The Board of Directors of a company in liquidation cannot pass a resolution granting benefits to employees without sanction from the Company Judge and prior clearance from the Bureau of Public Enterprises, especially when the company is running in losses and has no funds available.

JUDGMENT

Sanjeev Prakash Sharma, J. - The applicant-Krishi Udyog Karmachari Union, Rajasthan, Jaipur has filed the instant Company Application under Section 529 and 529-A of the Companies Act, 1956 and in terms of the order dated 19/05/2009 passed by the Division Bench in DB Civil Special Appeal (Writ) No.671/2000 with the prayer that the benefit of 5th Pay Commission be made applicable to the employees of the State Agro Industries Corporation and the respondents be directed to give effect to the resolution dated 26/06/1998 whereby the Board took a decision to release the benefit of 5th Pay Commission to its employees.

2. Brief facts which need to be considered are that the State Agro Industries Corporation (hereinafter referred to as the Company in liquidation) was decided to be wound up by the State Government vide its decision dated 29/02/1995 and a winding up petition was also filed before this Court. The winding up order was passed by the Company Court vide order dated 03/09/1997 which was confirmed by the Division bench vide its order dated 17/07/2000.

3. The case of the applicant-union is that the Board of Directors of the Company in liquidation in its 166th meeting held on 26/06/1998 decided vide resolution no.166(1)(8) to grant benefit of Revised Pay Scales and Selection Scale w.e.f. 01/09/1996 as has been granted by the State Government. A writ petition, bearing SB Civil Writ Petition No.4715/1998 was preferred before this Court praying for implementation of the said decision and the learned Single Judge of this Court vide its judgment dated 17/04/2000 allowed the writ petition directing the Board of Directors to implement the decision of the Board of Directors dated 26/06/1998. However, the DB Special Appeals No.670/2000, 671/2000 and 672/2000 were preferred which came to be decided by the Division bench on 19/05/2009 with following observations:-

"Having considered the entire facts and circumstances, since the entire matter is pending before the Company Judge and winding up order has already been passed, the general directions issued by the learned Single Judge cannot be sustained in the eyes of law. More so when all the facts had already been placed on record before the learned Single Judge and the factual aspect have not been considered by the learned Single Judge at all.

Learned counsel for the respondent-Union submitted that this Court may now issued directions to the Bureau of State Enterprises to take a decision in regard to resolution passed by the Board of Directors of the Corporation in the year 1998. However, in view of the pendency of the company petition and winding up order already been confirmed by the Division Bench, no such directions can be issued by this Court under writ jurisdiction now at this stage. It is for the union or the concerned employees to make proper application before the Company Judge for their grievance, if any.

Accordingly, the appeals are allowed, impugned judgment dated 17.4.2000 passed by the learned Single Judge is quashed and set aside."

4. The present Company Application has thereafter been filed.

5. Learned counsel for the applicant-union submits thatthe order of winding up was stayed by the Company Judge vide order dated 31/08/2000. So far as the order of Division Bench dated 17/07/2000 confirming the earlier order of winding up dated 03/09/1997 is concerned, the same was challenged before the Supreme Court and the Board of Directors were held empowered to take all decisions with regard to the Company in liquidation. The decision of the Board of Directors dated 26/06/1998 was in confirmation of its earlier decision dated 21/05/1998 and the decision was taken after approval from the Bureau of Public Enterprises and therefore, it was binding on the respondent-State to implement the same and the claim of the workmen is accordingly made out. Learned counsel for the applicant-union has taken this Court to the order dated 06/03/1998 issued by the Financial Adviser which mentions that