((-1-)) IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPLICATION NO.636 OF 2005 IN COMPANY PETITION NO.204 OF 1994 Engineering Workers Association, At Tel Rasayan Bhavan, Tilak Road, Dadar, Mumbai 400 014. Applicant versus The Official Liquidator, High Court, Bombay. Respondent Ms.N.D.Buch i/by B.B.Dholkia for applicant. Mr.Naushad Engineer for respondent. CORAM : S.C.DHARMADHIKARI, J. DATE OF RESERVING THE JUDGEMENT : 30.06.2006 DATE OF PRONOUNCING THE JUDGEMENT : 04.08.2006 JUDGEMENT :- 1. This company application by the applicant union seeks the following reliefs :- (a) The Official Liquidator, High Court, Bombay being liquidator of M/s.Poysha Industrial Co.Ltd. (in liquidation) be directed by an order of this Hon’ble Court to re-adjudicate the claims of all the 121 employees with respect to following :- (i) the statutory rate of interest on delayed payment of Gratuity under the Payment of Gratuity Act, (ii) statutory bonus @ 8.33% for the period 1994-95, 1995-96, 1996-97 and ((-2-)) 1997-98 as per Payment of Bonus Act, (iii) To make contribution of employers share to the Provident Fund Authorities for the relevant period, (b) That this Hon’ble Court be pleased to direct the Official Liquidator, High Court, Bombay to fully re-adjudicate the claims of the 21 employees (as per list annexed as Exhibit-E to Affidavit in Support hereof), (c) For ad interim relief in terms of prayer (a), (i), (ii) and (iii), (b) above." 2. At the outset, Ms.Buch appearing for the applicant contends that order in terms of prayer clause (b) needs to be passed straight way. She invites my attention to a statement which is annexed at Annexure-E to the affidavit-in-support of this Company Application. She invites my attention to the discrepancies at sr.nos.1, 2 and 11 and submits that a person joining at a later stage with lesser basic salary/wages, has been granted larger amount. At sr.no.1. a person joining in 1970 and having basic wage more than those who have joined later has been denied a substantial sum. 3. Shri Engineer appearing for the Official Liquidator, on the other hand, states that this is a statement which is placed before me by the ((-3-)) applicant. It is not true that any discrepancies have occurred. He invites my attention to the statements in affidavit-in-reply and more particularly paras 16 to 18. However, in para 19 of this affidavit, this is what is stated :- "19. Official Liquidator submits that Counsel for workmen may be advised to submit sufficient documentary evidence showing the basic wage of workman at Serial No.1 namely Shri Laxman S Gaikwad was Rs.241.02 ps. so as to enable the Official Liquidator to readjudicate the claim." 4. In the light of the statement made in the company application which is supported by figures and in the light of contents of para 19 of the Official Liquidator’s reply, in my view, interest of justice would be subserved if company application is made absolute in terms of prayer clause (b). There is no serious dispute as far as this relief is concerned. In any event, it is desirable that the Official Liquidator re-adjudicates the claim. However, the ambit and scope of readjudication and admissibility of claims before the Official Liquidator is the real issue. 5. Ms.Buch is pressing prayer clause (a) and in ((-4-)) that behalf she submits that the applicant union filed an affidavit dated 28th January 2002 in proof of debts along with detailed statement of 121 employees of the company in winding-up. All details were furnished. The Official Liquidator held several meetings for the purpose of adjudication of the claim and representatives of the applicant remained present at the meetings. She then relies upon the Minutes and submits that the adjudication of claims in respect of Salary, Gratuity, Retrenchment Compensation, Leave Salary, Provident Fund Contribution, LTC, Restored D.A., Bonus and notice pay has been done. She submits that upon adjudication the Official Liquidator has disallowed the claim of interest in respect of gratuity though the Payment of Gratuity Act, 1972 provides for the same. Similarly, as far as Provident Fund contribution is concerned, the Liquidator has observed that the workers must take up the matter with the Provident Fund authorities. 6. She submits that as far as claim for bonus is concerned, it has been allowed only for a period of one year though the employees had claimed bonus for the years 1994-95, 1995-96, 1996-97 and 1997-98. She submits that the Liquidator has ((-5-)) failed to follow the mandate of Sections 7(3A) and 8 of the Payment of Gratuity Act. She submits that payment of interest is required to be made under the statutory provisions, and, therefore, the Official Liquidator could not have disallowed the same. 7. She submits that even the claim for bonus could not have been disallowed. She submits that the relationship as employer- employee is deemed to have come to an end on the date of passing of the winding-up order by this Court i.e. on 9th January 1998. The date of closure of the unit was 1st May 1994 and hence bonus was claimed for a period of four years. It is submitted that the Official Liquidator has allowed the claim for salary for the above period on the basis that master-servant relationship ended only on 9th January 1998. Therefore, by the same logic, the payment of bonus ought to have been also made by allowing the claim in that behalf. She submits that bonus @ 8.33% is a statutory payment under the Payment of Bonus Act, and, therefore, the payment was justified. 8. Insofar as Provident Fund claim is concerned, her submission is that the claim could not have ((-6-)) been rejected or in any event the Liquidator was bound to make good the employer’s contribution from the funds available with him after disposal of assets. 9. She has invited my attention to the relevant provisions of Payment of Gratuity Act, Industrial Disputes Act, Payment of Bonus Act as also Companies Act in support of her above submissions. 10. On the other hand, Shri Engineer - learned counsel appearing for the Official Liquidator submits that the action of the Liquidator, in this case, cannot be faulted. He submits that the Official Liquidator has in consonance with the provisions contained in the Companies Act, Companies (Court) Rules, 1959, rightly disallowed the claim for interest on Gratuity so also Bonus. He submits that by inadvertence if the claim for bonus for one year has been allowed, that would not make any difference to the legal position. Legal position is that when a company is wound up and liquidation proceedings are in progress, then, till dissolution of the company, the liquidator has to be in-charge of the assets and properties. This is for effective completion of ((-7-)) the process contemplated by law. Every single claim as against the company in liquidation has to be placed before the Liquidator and he has been given power to adjudicate the same. The Legislature while enacting the Companies Act, 1956 and subsequently amending the same in the year 1985, was fully conscious and aware of the fact that the workers’ dues must also be paid off from the funds available after the sale of assets and properties of the company in liquidation. Being aware of the liability of workers as also the claims of secured creditors, the Legislature has placed them on par with each other. After 1985 the words "Pari Passu" have been used advisedly. The claims of secured creditors and workers are on par with each other but in some cases only. Shri Engineer submits that the Legislature thought it fit not to saddle the Liquidator with all claims of workers. It has deliberately used the term "Workmens’ Dues". The said term has been defined specifically. Therefore, no assistance can be taken of the provisions of Industrial Law to either compute or award the dues of workmen. So much of the workmens dues as is covered by the definition of the said term appearing in Section 529(3)(b) alone is admissible and payable by the ((-8-)) liquidator. Therefore, other sums due and payable, cannot be claimed from the liquidator. There is a reason for this inasmuch as the liquidator has to make an attempt and meet all types of liabilities and claims, if not in full, at least partially. If all types of claims and liabilities of the company in liquidation are adjudicated, then special treatment cannot be given to some claims. Even in this aspect, the Legislature has made a departure in the year 1985 and introduced Section 529-A which provides for overriding preferential payments and in that behalf my attention has been invited by Shri Engineer to sub section 2 of Section 529A. 11. In his submission, even when the workmens dues have been given preference and override certain other payments, yet, not all dues of the workmen are included in the said term. The term has been defined for the purposes of this preferential payment so as to exclude certain dues of workmen. He submits that such dues which have no relation with services rendered to the company and for which alone appropriate payment/ reimbursement has to be made, are included in the definition. At the same time, a provision is made for the survival of the workmen by including ((-9-)) sums due towards Provident Fund, Pension Fund, Gratuity Fund or any other fund maintained by the company for their welfare. Therefore, according to him, a balancing act has been performed by the Legislature. In these circumstances, it would be unfair to make payment of dues pertaining to workmen which are outside the purview of the above definition. That would render the provisions nugatory and redundant. Hence, gratuity has to be paid but merely because the concept of gratuity is covered in workmens dues, that does not mean that even interest for delayed payment under the Payment of Gratuity Act can be recovered or claimed from the Liquidator. 12. In the same way, their claim for bonus, is not admissible. The term "workmens dues" means the aggregate of the sums due from the company to it’s workmen namely all wages or salary as contemplated by Section 529(3)(b)(i). The reference therein is to the Industrial Disputes Act, 1947. If the argument of the applicant that Gratuity contemplated by definition of "workmens dues" means the Gratuity contemplated by Payment of Gratuity Act is accepted, then the same analogy will have to be applied and the term "Wages" as defined and understood by the ((-10-)) Industrial Disputes Act, would have to be taken into consideration. That definition {Section 2(rr)} specifically excludes "Bonus" as also any gratuity and any contribution payable by the employer in the pension fund or provident fund. Therefore, it is not possible to accede and accept this contention of the applicant. 13. In any event, according to Shri Engineer, bonus is not at all contemplated, and, therefore, that payment cannot be made. In his submission, as far as Provident Fund is concerned, the workmen will have to apply to the Provident Fund authorities and if the applicant can also so apply, then the Liquidator would render all assistance to them. This is the correct approach. The Liquidator has not denied that liability. For all these reasons he submits that the company application be dismissed. 14. In support of his contentions, Shri Engineer has relied upon judgement of a learned Single Judge of Gujarat High Court reported in Vol.99-Company Cases-189 (Textile Labour Association Vs. Official Liquidator of Jubilee Mills Ltd.), as also a judgement of Kerala High Court reported in (1998)5-Company Law Journal- ((-11-)) 383 (Mattoor Chits and Finance (P) Ltd. Vs. Mrs.Mary Baby). In this application, I am considering a case where the Official Liquidator is appointed pursuant to a winding up order passed by this Court on 9th January 1998. During the proceedings before the Official Liquidator it is stated that the unit is closed from 1st May 1994. Therefore, this is a case where the Liquidator is not called upon to run the factory or continue the business of the company in liquidation. The Liquidator is appointed to wind up and ultimately dissolve the company in liquidation. This aspect will have a great bearing on the ultimate conclusions reached in this judgement. 15. With the assistance of Ms.Buch and Shri Engineer I have perused the company application and the annexures thereto as also the affidavit in reply. I have perused the relevant provisions and the decisions brought to my notice. 16. In the affidavit in reply filed on 15th December 2005, the Official Liquidator has pointed out that by an order dated 9th January 1998 passed in Company Petition No.2004/1994, the Company M/s.Poysha Industrial Co. Limited has ((-12-)) been wound up and the Official Liquidator has been appointed as the Liquidator with usual powers under the Companies Act, 1956. The Liquidator has taken possession of the movable and immovable properties, which are situate at various places. He has disposed of several properties, immovable and movable, belonging to the company in liquidation and details of the properties remaining to be disposed off, are set out in para 4 of the same. 17. He has pointed out that in pursuance of the orders of this Court he received total number 1,563 claims from workmen, Sales Tax Department, secured creditors, preferential creditors and others. In para 7 of the affidavit in reply, this is what is stated by the Official Liquidator:- 07. That out of the above claims the Official Liquidator has adjudicated and admitted the claims of 1279 Workmen and the Certified List of 1269 Workmen alongwith 1st Supplementary List of 10 Workmen has been filed with the Prothonotary & Senior Master, High Court Bombay on 31st March 2004 and 17th November 2004 respectively aggregating to a sum of Rs.28,45,34,968/- (Rupees Twenty Eight Crores Forty Five Lakhs Thirty Four Thousand Nine Hundred Sixty Eight only) and Rs.16,93,913/- (Rupees Sixteen Lakhs Ninety Three Thousand Nine Hundred ((-13-)) Thirteen only) totalling to a sum of Rs.28,62,28,881/- (Rupees Twenty Eight Crores Sixty Two Lakhs Twenty Eight Thousand Eight Hundred Eighty One only). He has pointed out that a view has been taken by this Court with regard to priority to be given to the Sales Tax dues on par with the dues of workmen and secured creditors. However, there are no claims of the Sales Tax Department. In the affidavit he has pointed out the names of secured creditors and correspondence with them for ascertaining the details of their claim. He points out that he is at present having a sum of Rs.6.17 crores available to the credit of the company in liquidation and in addition to that, a sum of Rs.4.50 crores which have already been deposited with the banks and financial institutions, details of which are also enlisted in para 11 of the affidavit. 18. In para 14 of the affidavit he has enlisted the procedure which he has followed while adjudicating the claims of the workmen. However, since the direction is now issued to readjudicate the claims of 21 workmen by consent, this aspect need not be gone into in details. Even otherwise, there is no quarrel or dispute raised ((-14-)) before me with regard to the procedure adopted by the Official Liquidator. As far as interest on delayed payment of gratuity is concerned, the Liquidator in para 15 of this affidavit states thus :- "15. With reference to the averments made in para 10 of the affidavit, I say that the interest on delayed payment of gratuity can be considered in terms of Rule 179 of the Companies (Court) Rules, 1959 as and when any surplus funds are available with the Official Liquidator." 19. As far as Provident Fund dues is concerned, he has contended that the P.F. Authority will have to lodge its claim with the Official Liquidator in prescribed form and he states that prescribed form is Form No.46. This is in substance his stand in the matter. 20. For properly appreciating the rival contentions, a reference will have to be made to Sections 528, 529 and 529A of the Companies Act. Chapter-V of Companies Act in which these sections find place is a chapter which contains provisions applicable to every mode of winding up. There is a sub heading before Section 528 and it is entitled proof and ranking of claims. ((-15-)) Section 528 provides the debts of all descriptions to be admitted to proof. This provision reads thus:- "S.528 : Debts of all descriptions to be admitted to proof.- In every winding up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value." A bare reading of the same would make it clear that although all debts and claims against the company shall be admissible to proof against the company, it does not mean that the Liquidator is bound to honour such dues and claims. That would be clear on reading of latter part of Section 528. A just estimate has to be made so far as possible of the value of such dues or claims which are contingent or which are in the nature of damages or for some other reason, may not bear a certain value. ((-16-)) 21. Section 529 as it originally stood, did not have any provision which would equate the dues of workmen with that of a secured creditor. However, with the introduction of Section 529A of the Companies (Amendment) Act, 1985 (for short referred to as the "Amending Act"), a proviso has been incorporated below sub section 1 of section 529. Section 529 after amendment reads thus :- "S.529 - Application of insolvency rules in winding up of insolvent companies.- (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to- (a) debts provable; (b) the valuation of annuities and future and contingent liabilities; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent : (Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen’s portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security,- (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement of such charge ((-17-)) shall be applied rateably for the discharge of workmen’s dues; and (c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen’s portion in his security, whichever is less, shall rank pari passu with the workmen’s dues for the purposes of section 529A). (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section : (Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to pay his portion of the expenses incurred by the liquidator including a provisional liquidator, if any for the preservation of the security before its realization by the secured creditor. Explanation : For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less an amount which bears to such expenses the same proportion as the workmen’s portion in relation to the security bears to the value of the security. (3) For the purposes of this section, Section 529A and Section 530,- (a) "workmen" in relation to a company, means the employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947); (b) "workmen’s dues" in relation to a company, means the aggregate of the ((-18-)) following sums due from the company to its workmen, namely:- (i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of service rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947); (ii) all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution; (iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen’s Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company; (iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company; (c) "workmen’s portion", in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen’s dues bears to the aggregate of- (i) the amount of workmen’s dues; and (ii) the amounts of the debts due to the secured creditors." ((-19-)) 22. Thus, after amendment the security of every secured creditor is deemed to be subject to a pari passu charge in favour of workmen to the extent of workmen portion therein. A secured creditor has an option of realising the security or relinquishing it and prove his debt. However, if he opts to realise a security, then he has to abide by the mandate of proviso to sub section 1 of Section 529. When Section 529A was introduced, an amendment was also made to Section 530. It then became necessary to define the terms "workmen, workmens dues and workmens portion". Section 529A providing over-riding preferential payments, reads thus:- "S.529A - Overriding preferential payments.- (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company- (a) workmen’s dues; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of sub section 529 pari passu with such dues, shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub section (1) shall ((-20-)) be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions." 23. A bare reading of this provision would indicate that notwithstanding anything contained in any other provision of the Companies Act or any other law for the time being