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2022 Supreme(All) 173

IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
JAYANT BANERJI, J.
M/s LML Limited - Petitioner
Versus
State of U.P. And Others - Respondents
Writ - C No. 10015 of 2021
Decided On : 25-01-2022

Advocates Appeared:
For the Petitioner: Shubham Agarwal.
For the Respondent: C.S.C., Bushra Maryam.

Headnote:(A) Sick Industrial Companies (Special Provisions) Act, 1985 - Liquidation proceedings of the petitioner-company initiated under the Insolvency and Bankruptcy Code, 2016 - The Industrial Tribunal found the lay-off of workmen on 15.04.2007 illegal and entitled them to full wages and benefits. The Tribunal's award upheld due to lack of evidentiary support for the lay-off legality. (Paras 46-64)

(B) Industrial Disputes Act, 1947 - Section 2(n), Section 6-K - The definition of lay-off and the employer's obligations in cases of laid-off workmen discussed; court asserts that employers cannot indefinitely lay off workers without just cause. (Paras 27-28)

(C) Moratorium under the Insolvency and Bankruptcy Code, 2016 - The order of moratorium ceases upon liquidation; the Industrial Tribunal's award engages with the distribution of assets prioritizing workers’ dues. (Paras 51-62)

Table of Content
1. writ petition filing details and parties involved. (Para 1 , 2)
2. background on company's financial distress and union negotiations. (Para 3 , 4 , 5)
3. arguments related to the legality of layoffs and union representation. (Para 8 , 9 , 10)
4. court's observations on previous judgments regarding dispute settlement. (Para 12 , 13 , 20)
5. legal standards on layoffs and employment rights. (Para 14 , 15 , 22)
6. court's findings on the validity of the layoff and settlement terms. (Para 24 , 29 , 32)
7. entitlement of workers to wages and consequences of liquidation. (Para 46 , 48 , 61)
8. final disposal of the writ petition. (Para 64)

JUDGMENT :

1. This writ petition has been filed by the Company under liquidation through the authorized signatory of the liquidator against the following respondent :

"1. State of U.P. through State of U.P. through its Principal Secretary, Labour Department, Government of U.P. Secretariate, Bapu Bhawan, Lucknow

2. Presiding Officer, Industrial Tribunal(III), Kanpur, Uttar Pradesh

3. LML Mazdoor Ekta Sangathan F-679, Barra-8, Kanpur"

2. The prayer in the petition is for quashing/setting aside the award dated 19.2.2020 published on 12.3.2020 made by the Industrial Tribunal. Further relief has been sought for restraining the respondents from proceedings against the petitioner-company pursuant to the aforesaid award.

3. The facts appearing in the present petition is that the Company was engaged in the business of manufacturing of geared scooters and had an employee strength of more than 6,000 employees including staff and workers. Around the late 1990s in view of the significant change in the consumer behavior towards motorcycles as opposed to scooters, the Company suffered substantial losses. On inability to arrange fresh working capital, the Company was only able to achieved partial restructuring in the year 2005. However, in view of the rapid erosion of the Company's net worth, a reference was filed before the Board for Industrial and Financial Restructuring, [BIFR] under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, [SICA]. In the proceeding of BIFR held on 8.5.2007, an operating agency was appointed to prepare a revival scheme if feasible.

4. The workmen of the petitioner-Company resorted to strikes and demonstrations with effect from 27.2.2006, which paralyzed its functioning and a lockout was declared with effect from 7.3.2006. In order to salvage the Company's business, the management of the Company and its workmen represented by the registered union of the Company namely Lohia Machines (LML) Karmchari Sangh, [LMLKS], engaged in protracted tripartite discussions and arrived at settlement on 13.4.2007 before the Additional Labour Commissioner, Kanpur Region, Conciliation Officer and Additional Labour Commissioner (IR) U.P., Head Office Kanpur. It is stated that since the inception of the petitioner-Company, and at the time of the negotiations, the interests of the workmen were represented solely by LMLKS. In terms of the aforesaid settlement, it was decided that the workmen would withdraw the strike and the lockout would be lifted with effect from 15.4.2007; that the petitioner-Company will take steps to revive the establishment and only such number of workmen shall be taken on work and employment in phases as per requirement of work and production as far as on departmental seniority basis, and all other workmen, save and except those who were required to resume work and production, shall stand laid off. The settlement further provided that the laid off workmen would be entitled to receive lay off compensation in the manner specified.

5. Thereafter, the lockout was lifted with effect from 15.4.2007 and the settlement was implemented. However, a small splinter group of workmen describing themselves as LML Mazdoor Union which was neither a registered nor a recognized union filed a Writ Petition No. 25445 of 2007 seeking to dissolve the settlement, which petiti

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