IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN, JAIPUR BENCH, JAIPUR. JUDGMENT Shree Sakariya Spinners Workers Union & Anr. Vs. RIICO (S. B. Civil Writ Petition No.2506/2005) S.B. Civil Writ Petition under Article 226 of the Constitution of India. Date of Judgment: January 20, 2009 PRESENT Hon'ble Mr. Justice R. S. Chauhan Mr. P.N. Bhandari, for the petitioner No.1. Mr. Ajeet Bhandari, for respondent. BY THE COURT: On the face of the record, this writ petition has been filed by both the Workers' Union of Shree Sakariya Spinners Ltd., and by the Company Shree Sakariya Spinners Ltd. However, during the course of arguments, it was revealed to this Court that earlier the Company, Shree Sakariya Spinners Ltd. had filed a writ petition raising the same dispute against the respondent before this Court. The said writ petition was dismissed by this Court. Therefore, subsequently, the present writ petition has been filed ostensibly by the Workers' Union, but in fact, the present writ petition is a subterfuge to re-agitate the same dispute as was agitated in the earlier writ petition before this Court. When this clever ploy utilised by the petitioner No.2 was exposed in the Court, the learned counsel for petitioners, Mr. P.N.Bhandari, conceded frankly that he is arguing the case only on behalf of the Workers' Union and not on behalf of the company. Hence, the controversy being raised would be adjudged only vis-a-vis the Workers' Union. 2. The brief facts leading to this writ petition are as under:- After shifting from Mumbai in 1996, with the financial support of Rajasthan State Industrial Development and Investment Corporation Ltd. (`RIICO' for short), Shree Sakariya Spinners Ltd. (`the Company' for short) established its spinning unit in Bhilwara. The project was conceived and executed to produce coarse count cotton yarn which are used in denim and terry towel industry. Although the production was supposed to begin in March,1997, but the production began in October,1997. The delay was caused due to strike at the Sea Port. and because of the delay in disbursement of payment. Moreover, due to bad market condition with regard to denim, the productivity of the project went down by nearly 50%. Consequently, the company sufferred huge loss in the financial years 1997-98 and 1998-99. This was also the period when world wide recession badly hit the textile market. In order to make the company viable and to increase the production the company invested Rs.60 lakhs. However, because of the bad economic condition neither the productivity, nor profitability of the company could be increased. In order to set up the unit, the Company had taken a loan of Rs.227.08 lakhs from RIICO. Moreover, it had taken financial assistance from Bank of Baroda. Because of the prevailing recession in the market, the Company could not make payment of interest to RIICO for a number of years. But instead of extending any cooperation, RIICO issued a notice dated 11-10-2000 under Section 30 of the State Financial Corporation Act,1951 (`the Act' for short) and demanded the repayment of Rs.3,42,37,183/-. It also informed the Company that in case the repayment is not made within a period of 15 days, RIICO would take over the management and possession of the Company under Section 29 of the Act . Immediately on 17-10-2000, the Company requested RIICO to refrain from taking over the possession of the mill and to extend their cooperation in running the mill. Furthermore, vide letter dated 22-11-2000, the Company drew attention of respondent to the recent concessions/ benefits announced towards industries whereby interest rate was reduced and other concessions were given and requested RIICO to help in reviving the company. Consequently, RIICO invited the company for negotiations. The Company submitted a reply for repayment of over- dues. However notwithstanding the proposals made by the company, suddenly on 2-5-2001, the officials of RIICO entered the premises of the mill, took over the possession and stopped the running of the mill. According to Workers' Union, with the closure of the mill they were left unemployed. This action and the notice dated 20-10-2001 issued by RIICO under section 30 of the Act, are under challenge before this Court. 3. Mr. P.N.Bhandari, the learned counsel for the union, has raised following contentions before this Court: firstly, RIICO has not only taken over the assets of the company, but most importantly, it has taken over the management of the company. Therefore, RIICO has become defacto employer of the workers. According to the learned counsel, section 29 of the Act permits the Financial Corporation to take over the management, or possession of the assets. Section 32B, further states that once a notified order under section 32A has been passed, all persons holding the office as directors of an industrial concern and all the persons holding any office having the powers of superintendence, direction and control of the industrial concern shall be deemed to have vacated their office. Therefore, by taking over the possession of the assets of the company by RIICO, the directors and other officers of the company are deemed to have vacated their office. Hence, RIICO has stepped into the shoes of company. Thus, it has become defacto employer of the workers. Secondly, that as the employer of the workers, RIICO is legally bound to protect and promote rights of the workers. Thus RIICO is not justified in closing down the mill and throwing the workers out into the cold. Such an action on the part of RIICO clearly violates the rights of the workers under Articles 14 and 21 of the Constitution of India. In order to buttress this contention, the learned counsel has relied on the case of Jute Mill Mazdoor Sabha Katihar Vs. State of Bihar [1990 Labour Industrial Cases 756], and Everest Wools Pvt. Ltd. Vs. UP Financial Corporation, Civil Appeal 2707-2708 of 2003 decided by the Apex Court on 14-12-2007. 4. On the other hand, Mr. Ajeet Bhandari, the learned counsel for RIICO, has contended that RIICO has contended that RIICO has merely taken over possession of assets of the company. But, it has not taken over the management of the company. According to the learned counsel, the Act prescribes the procedure for taking over the management of the company – a procedure contained in section 32A of the Act. According to the procedure, under section 29 of the Act, RIICO has power to take over the possession of assets of the company as well as to take over the management of the company. Once, it takes over the assets of the company under section 29(5), it is deemed to be the owner of such concern. However, a distinction has been made between “taking over assets” and “taking over the management”. Taking over management would imply the power to appoint directors. The said power exists under section 32A of the Act. Section 32A, clearly states that when the management of an industrial concern is taken over, the financial corporation would have power to appoint directors of that industrial concern in case of company, and in any other cases the Administrators of that industrial concern. But, for the purpose of such appointment, an order needs to be notified in the Official Gazette. It is only when the order has been notified in the Official Gazette, that the deeming provision of section 32B comes into effect. However, in the present case, RIICO has not notified any order in the Official Gazette for appointment of Director in the Board of Directors of Company. Hence, it has not taken over the management of the company. Therefore, if any dispute exists with regard to closure of mill, the dispute exists only between the Workers' Union and the company. Such a dispute does not concern RIICO. Therefore, the writ petition is highly misplaced. Secondly, in the alternative, in case, RIICO is deemed to be the employer of the workers, then a dispute has arisen between the workers and employer. In such a scenario, the workers have an alternative remedy of raising the dispute before the appropriate forum under the provisions of Industrial Disputes Act,1947. Since, an efficacious alternative remedy is available to workers, writ jurisdiction of this Court under Article 226 cannot be invoked. 5. Heard learned counsel for the parties and perused the material available on record. 6. Section 29 of the Act is as under:- “29. Rights of Financial Corporation in case of default. (1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the right to take over the management or possession or both of the industrial concerns, as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2) Any transfer of property made by the Financial Corporation, in exercise of its powers under sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had been made by the owner of the property. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the security held by it as it had with respect to the original goods. (4) Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it as incidental thereto shall be recoverable from the industrial concern and the money which is received by it shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto. (5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub- section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and sued in the name of the concern.” 7. Section 32-A of the Act is as under:- “32A. Power of Financial Corporation to appoint directors or administrators of an industrial concern when management is taken over. (1) When the management of an industrial concern is taken over by the Financial Corporation, the Financial Corporation may, by order notified in the Official Gazette, appoint as many persons as it thinks fit,- (a) in any case in which the industrial concern is a company as defined in the Companies Act, 1956 (1 of 1956), to be directors of that industrial concern; or (b) in any other case, to be administrators of that industrial concern. (2) The power to appoint directors or administrators under this section includes the power to appoint any individual, firm or company to be the managing agent or manager of the industrial concern on such terms and conditions as the Financial Corporation may think fit. (3) Nothing in the Companies Act, 1956 (1 of 1956.) or in any other law for the time being in force or in any instrument relating to the industrial concern shall, in so far as it makes in relation to a director, any provision for the holding of any share qualification, age limit, restriction on the number of directorships, retirement by rotation or removal from office, apply to any director appointed by the Financial Corporation under this section.” 8. Section 32-B of the Act is as under:- “32B. Effect of notified order under section 32A. On the issue of a notified order under section 32A,- (a) in any case in which the industrial concern is a company as defined in the Companies Act, 1956 (1 of 1956), all persons holding office as directors of the industrial concern and in any other case, all persons holding any office having the powers of superintendence, direction and control of the industrial concern, immediately before the issue of the notified order, shall be deemed to have vacated their offices as such; (b) any contract of management between the industrial concern and any managing agent or any director or manager thereof holding office as such immediately before the issue of the notified order shall be deemed to have terminated; (c) in the case of an industrial concern which is a company as defined in the Companies Act, 1956 (1 of 1956), the managing agent, if any, appointed under section 32A shall be deemed to have been duly appointed in pursuance of the said Act and the memorandum and articles of association of the industrial concern and the provisions of the said Act and the memorandum and articles shall, subject to the other provisions contained in this Act, apply accordingly, but no such managing agent shall be removed from office except with the previous consent of the Financial Corporation; (d) the directors or the administrators appointed under section 32A shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims to which the industrial concern is, or appears to be, entitled, and all the property and effects of the industrial concern shall be deemed to be in the custody of the directors or administrators, as the case may be, as from the date of the notified order; (e) the directors appointed under section 32A shall, for all purposes, be the directors of the industrial concern duly constituted under the Companies Act, 1956 (1 of 1956), and such directors, or as the case may be, the administrators appointed under section 32A, shall alone be entitled to exercise all the powers of the directors or as the case may be, of the persons exercising powers of superintendence, direction and control, of the industrial concern, whether such powers are derived from the said Act or from the memorandum or articles of association of the industrial concern or from any other source whatsoever.” 9. A perusal of section 29 of the Act clearly reveals that State Financial Corporation does have the power to take over management or the possession of assets or both as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. Hence, a vast power has been bestowed on the Financial Corporation. However, each power is distinct and separate. Merely, because the assets of the company have been possessed by the Financial Corporation, would not imply that the Corporation has become an employer. According to section 29(5) of the Act, at best the Financial Corporation becomes owner of the unit. But, even then a distinction has been made between “the owner” and “the employer”. Until and unless, Financial Corporation takes over the management of the company, it does not transform itself into an employer. 10. Sections 32A and 32B of the Act, have to be read conjointly. Section 32A of the Act empowers the Financial Corporation to appoint directors on the Board of Directors of the company or to appoint an administrator. The deeming provision of section 32B comes into effect, only after the order under section 32A has been notified in the Official Gazette. 11. In the present case, there is not an iota of evidence to show that an order passed under section 32A of the Act has been notified in Official Gazette. Therefore, the deeming provision of section 32 B(a) has not come into operation. Hence, the contention of the learned counsel for the workers that RIICO should be deemed to be an employer of the workers is highly misplaced. 12. Even if, the said contention were to be accepted for the sake of arguments, even then the writ petition is misconceived. Admittedly, Workers' Union cannot be aggrieved by issuance of notice under section 30 of the Act to the company. For, it is a matter between the company, which has borrowed money from RIICO, and the lender. The dispute, if any, arisen out of notice under section 30 of the Act, is confined to only the company and RIICO. Under the provisions of section 30 of the Act, Workers' Union has no concern. Thus, Workers' Union has no locus standi to challenge the notice issued under section 30 of the Act. 13. The only dispute that arises between the Wokers' Union and RIICO is with regard to legality or illegality of closure of the mill, the said dispute cannot be agitated in a writ jurisdiction; firstly, the said dispute raises complicated questions of facts, which cannot be adjudicated in writ jurisdiction. Secondly, the said dispute relates to Industrial Disputes Act, which can be raised and decided under the provisions of Industrial Disputes Act,1947. Therefore, the Workers Union has efficacious remedy available to it. Hence, this writ petition is not maintainable. 14. Learned counsel for the petitioner has referred to the cases of Jute Mill Mazdoor Sabha Katihar (supra) and Everest Wools Pvt. Ltd. (supra). A perusal of the former case clearly reveals that the question whether Jute Mill Mazdoor Sabha Katihar had an alternative remedy and can therefore refer the dispute under Industrial Disputes Act, was not even raised in that case. Therefore, the said case is inapplicable to the present petition. Moreover, the latter case was a dispute between the company and UP Financial Corporation. The interest and disputes of the workman was not raised in the said case. Therefore, on factual matrix, the said cases are distinguishable from the present case. Hence, neither of the two cases come to the give rescue to the petitioner. 15. Thus, seen from any angle, this writ petition is devoid of merit. It is, hereby, dismissed without any order as to costs. ( R.S. CHAUHAN ) J. arn