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2022 Supreme(Online)(KER) 44462
HIGH COURT OF KERALA
P. B. Suresh Kumar, C.S. Sudha, JJ
THE CHAIRMAN AND MANAGING DIRECTOR – Appellant
Versus
BST AND PST WORKERS UNION(CITU)AND OTHERS – Respondent
Co.Appeal 27 2009
SRI.K.M.ANEESH, SRI.V.CHITAMBARESH SR., SRI.DEVAN RAMACHANDRAN, SRI.P.GOPINATH, SRI.A.K.JAYASANKAR NAMBIAR, SMT.MARIAM MATHAI, SRI.K.MONI, SRI.E.K.NANDAKUMAR, SRI.M.PATHROSE MATTHAI, SR.SRI.SAJI VARGHESE, SRI.T.C.SURESH MENON, SRI.N.N. SUGUNAPALAN, SC, P.F., SRI.JAMES KURIAN, CGC, SRI.V.K.SUNIL, SR.GP
The reference under Section 15(1) of SICA abates when BIFR forwards an opinion to wind up a company, thereby applying provisions under Section 13(9) of the SARFAESI Act regarding worker dues.
Headnote:
SICA - Winding Up - Sick Industrial Companies (Special Provisions) Act, 1985 - Sections 15(1), 20(1) and SARFAESI Act, 2002 - The court held that a reference under Section 15(1) of SICA abates upon the BIFR's opinion to wind up the company, and thus the second proviso to Section 13(9) of SARFAESI Act applies to the sale of the company's assets, requiring the proceeds to be deposited with the liquidator.
Fact of the Case:
The applicant, a workers' trade union, sought to direct a consortium of banks to deposit sale proceeds of secured assets with the liquidator, following BIFR's recommendation for the company's winding up. The banks contested, arguing the reference had abated before their actions.
Finding of the Court:
The court ruled that the company's winding up began when BIFR's opinion was forwarded to the court and affirmed that measures taken under SARFAESI Act after that date are subject to the requirements of Section 13(9), necessitating the deposit of workers' dues.
Issues: Whether the reference under Section 15(1) of SICA abated upon BIFR's opinion for winding up, and if the SARFAESI Act applies regarding the distribution of sale proceeds of secured assets.
Ratio Decidendi: A reference under Section 15(1) of SICA is considered abated once an opinion for winding up is forwarded to the court, and subsequent actions under the SARFAESI Act must comply with provisions concerning workers' dues.
Final Decision: The appeals were dismissed, affirming the order directing deposit of workers' dues with the liquidator.
JUDGMENT
P.B.Suresh Kumar, J.
These appeals are directed against the order dated
03.08.2009 in C.A.No.522 of 2008 in C.P.No.23 of 2006. The appellants are respondents 4 to 8 in C.A.No.522 of 2008. The parties are referred to in this judgement, as they appear in C.A.No.522 of 2008.
2. The applicant is a trade union of the workers of the company under liquidation. During 2003, when the Company became sick, the Board of Directors of the Company made a reference to the Board for Industrial and Financial Reconstruction (the BIFR) under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (the SICA)
for appropriate measures to be taken for revival of the Company. On 29.09.2005, the BIFR, after making necessary inquiries and after affording an opportunity of hearing to all concerned, formed an opinion that the Company is not likely to become viable and that it is only just and equitable to wind up the Company, and forwarded the said opinion to this Court in terms of Section 20 (1) of the SICA to order winding up of the Company in accordance with the provisions of the Companies Act, 1956 (the Companies Act). C.P.No.23 of 2006 is the company petition registered on the basis of the said opinion of the BIFR. Notice was ordered in C.P.No.23 of 2006 on 02.08.2006 and on 02.11.2007, after hearing all the parties concerned, this Court ordered winding up of the Company.
3. A consortium of Banks led by the fourth respondent was extending financial assistance to the Company on the security of two major assets of the Company. While the proceedings before the BIFR was pending, the fourth respondent, on behalf of the consortium of Banks, initiated proceedings against the secured assets of the Company under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the SARFAESI Act) and the Authorised Officer appointed by the fourth respondent took possession of one of the secured assets on 15.10.2005 and the other on 13.02.2006 as provided for under Section 13 (4) of the SARFAESI Act. Later, on 29.06.2006, one of the secured assets was sold by the Authorised Officer of the fourth respondent in accordance with the provisions of the SARFAESI Act and the sale proceeds were appropriated by the fourth respondent and their consortium partners.
4. In the meanwhile, 74 workmen of the Company preferred a claim petition against the Company before the Labour Court, Kozhikode as C.P.No.21 of 2005 and obtained an order directing the Company to disburse a sum of Rs.56,16,987/- towards the benefits due to them. The Company did not comply with the said order. C.A.No.522 of 2008 was filed by the applicant, in the above circumstances, seeking a direction to the fourth respondent to deposit the proceeds of the sale of the secured asset effected by them with the official liquidator. The case set out in the said application is that the Company being a company which is being wound up, in terms of the second proviso to Section 13 (9) of the SARFAESI Act, the fourth respondent is entitled to retain the proceeds of the sale of the assets of the Company only after depositing the workmen's dues with the liquidator.
5. A counter affidavit has been filed by the fourth respondent in C.A.No.522 of 2008 contending, among others, that the reference before the BIFR has abated in terms of the third proviso to Section 15 (1) of the SICA when they took possession of one of the secured assets on 15.10.2005; that the Company cannot be treated thereafter as a company which is being wound up and the second proviso to Section 13 (9) of the SARFAESI Act does not therefore apply to the sale effected by them later on 29.6.2006. It was also contended by the fourth respondent that at any rate, the Company cannot be treated as a company which is being wound up in order to apply the second proviso to (9) of the SARFAESI Act before it was ordered to be wound up by this Court on 02.11.2007 and the said provision does not there
