Back
HIGH COURT OF KERALA
P. B. Suresh Kumar, C.S. Sudha, JJ
ICICI BANK LTD – Appellant
Versus
BST AND PST WORKERS UNION (CITU) – Respondent
Co.Appeal 23 2009
Winding Up - Sick Industrial Companies - Sick Industrial Companies (Special Provisions) Act, 1985 Sections [15(1), 20(1)] and Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section [13(4), 13(9)] - The BIFR's opinion to wind up a sick company marks the commencement of winding up, rendering proceedings before BIFR abated in specified circumstances. The Court emphasized the necessity of adherence to statutory provisions in ensuring the protection of employees' dues during asset recovery.
Fact of the Case:
This case involved the winding up of a sick industrial company that was found unviable by the BIFR. The company failed to comply with a Labour Court order mandating compensation for its workers. The appellants sought to compel a bank consortium to deposit sale proceeds of the company's secured assets to cover worker dues, citing provisions from SICA and SARFAESI Act.
Finding of the Court:
The court ruled that the BIFR's opinion to wind up the company constituted the start of the winding-up process. The bank’s actions post-BIFR opinion were deemed inappropriate as they conflicted with provisions protecting employees, specifically elucidating that proceeds from asset sales should be directed to the liquidator for the benefit of workers.
Issues: Whether the reference before the BIFR abated following the BIFR's opinion that the company was to be wound up, and whether SARFAESI provisions apply to sales conducted after this opinion.
Ratio Decidendi: The court held that once the BIFR's opinion was formed to wind up the company, all proceedings abated, affirming that winding up commenced at that point, thereby ensuring creditor actions must conform to employee safeguarding provisions.
Final Decision: The appeals were dismissed, upholding the directive for banks to pay workers' dues from asset sale proceeds.
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
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
