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2022 Supreme(Online)(KER) 12229
HIGH COURT OF KERALA
P. B. Suresh Kumar, C.S. Sudha, JJ
STATE BANK OF TRAVANCORE – Appellant
Versus
B.S.T. AND P.S.P.WORKERS UNION (CITU) – Respondent
Co.Appeal 4 2010
Sri.M.Pathrose Matthai (Sr.), Smt.Mariam Mathai, Sri.Saji Varghese, Sri.K.M.Aneesh, Sri.V.Chitambaaresh Sr., Sri.Devan Ramachandran, Sri.P.Gopinath, Sri.A.K.Jayasankar Nambiar, Sri.K.Moni, Sri.E.K.Nandakumar, Sri.M.Pathrose Matthai Sr., Sri.S.Easwaran, Sri.T.C.Suresh Menon, Sri.Santhosh Mathew, Sri.James Kurian, CGC, Sri.V.K.Sunil, SR.GP
A sick company's winding up is deemed to commence from the BIFR's opinion, not the court's order, affecting secured creditors' obligations under the SARFAESI Act.
Headnote:
Winding Up - Sick Industrial Companies Act - 15(1), 20(1); SARFAESI Act - 13(4), 13(9) - The court ruled that a company is deemed to be in winding up immediately upon the BIFR's opinion to that effect, impacting secured creditors' rights under the SARFAESI Act.
Fact of the Case:
A trade union claimed workers' dues from a company under liquidation, which the BIFR deemed not viable. The company was subject to winding up after BIFR's opinion, leading to disputes over secured asset sales by banks.
Issues: Whether the reference under Section 15(1) abated upon BIFR's opinion for winding up, and if secured creditors were bound by the provisions concerning workers' dues post this opinion.
Ratio Decidendi: The court highlighted that a company is considered to be in winding up from the date of BIFR's opinion, not just from the formal court order, impacting the application of the SARFAESI Act to secured creditors.
Final Decision: The appeals were dismissed, affirming the order for the banks to deposit workers' dues.
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
