1 wp-1153.95 Ash IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 1153 OF 1995 National Textile Corporation (South) Maharashtra ) Ltd. .. Petitioner Vs The Kohinoor Mills Employees Co-operative Credit Society Ltd. & Others. .. Respondents -- Smt. Meena H. Doshi for the Petitioner. Shri Balkrishna D. Joshi for Respondent No.1. Shri D.R. Shah for Union of India. -- CORAM : A.S.OKA, J. DATE : 9TH SEPTEMBER, 2010 ORAL JUDGMENT : By this Writ Petition under Article 227 of the Constitution of India, the Petitioner has taken an exception to the various orders passed by the authorities under the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as the “said Act” ). 2 wp-1153.95 2. The 1st Respondent is a Co-operative Credit Society formed by the employees of Kohinoor Mills. The Petitioner is the National Textile Corporation ( South Maharashtra Limited ). There was a tripartite agreement by and between the 1st Respondent – Society, the employees of the 2nd Respondent - Kohinoor Mills Company Limited and the 2nd Respondent by which the Kohinoor Mills agreed to deduct part of wages payable to its employees and to pay over the same to the 1st Respondent Co-operative Credit Society towards repayment of loan advanced to the employees by the 1st Respondent. The Textile Undertakings ( Taking Over of Management ) Ordinance, 1983 ( hereinafter referred to as “the said Ordinance of 1983”) was promulgated by the Central Government. Under the said Ordinance, the Management of certain textile undertakings vested in the Central Government from the appointed day i.e 18th October 1983. The said Ordinance was repealed and the Textile Undertakings ( Taking Over of Management ) Act, 1983 ( hereinafter referred to as “the said Act of 1983”) was enacted. Under the said Ordinance and the said Act of 1983, the Textile Undertaking of the Kohinoor Mills Company Limited was covered and the management thereof was vested in the Central Government. The Petitioner was appointed as an additional custodian to manage the affairs of Kohinoor Mills. At this stage, it must be stated that the Textile Undertakings (Nationalisation ) Ordinance 1995 was promulgated which was repealed by the Textile Undertakings ( Nationalisation) Act, 1995 ( hereinafter referred to as the “said Act of 1995” ). Under the provisions of Sub-section (1) of Section 3 of the said 3 wp-1153.95 Act of 1995, from the appointed day, the right, title and interest of the owner of Kohinoor Mills ( Nos.1, 2 and 3 ) was transferred and vested in the Central Government. Under Sub-section (2) of Section 3 of the said Act of 1995, the said Textile Undertaking which stood vested in the Central Government was transferred to and vested in the National Textile Corporation. 3. An application was filed by the 1st Respondent before the District Deputy Registrar of the Co-operative societies to which the 2nd Respondent Kohinoor Mills, Directors of the 2nd Respondent and Union of India were the parties. The said application was made under Section 49 of Maharashtra Co- operative Societies Act, 1960 ( hereinafter referred to as “the said Act of 1960”). Reliance was placed by the 1st Respondent on the tripartite agreement. It was contended that in terms of the tripartite agreement and in accordance with Section 49 of the said Act of 1960, the 2nd Respondent-Company deducted certain amounts from the wages of the employees who were the members of the 1st Respondent and a total sum of Rs.10,12,276.46 was collected which was payable to the 1st Respondent as on 10th January, 1982. It was contended that the Directors of the 2nd Respondent were also personally liable to pay the amount. Apart from the said amount, interest and other amounts were claimed by the 1st Respondent. 4 wp-1153.95 4. The said application was contested by the 2nd Respondent. The Assistant Registrar of Co-operative Societies passed an order dated 9th January, 1987 directing the custodian of Kohinoor Mills to pay to the 1st Respondent a sum of Rs.15,55,934.50 ps. with interest thereon at the rate of 12% per annum from the date of filing of the said application till realization. A revision application was filed at the instance of the custodian of Kohinoor Mills. One of the grounds in the revision application was that the Assistant Registrar who passed the order had no jurisdiction to pass an order. The revision application was allowed and the matter was remanded to the Assistant Registrar who was having the jurisdiction. After the remand, the Assistant Registrar passed an order dated 26th November 1987 directing the petitioner to pay a sum of Rs.15,55,943.50 with interest thereon at the rate of 12% per annum. There were two revision applications filed against the said order of the Assistant Registrar. One revision application was filed by the 1st respondent credit society and the other one by the petitioner. The Divisional Joint Registrar by judgment and order dated the 16th June 1992, dismissed both the revision applications. Being aggrieved by the aforesaid orders, the petitioner preferred a revision application before the state government. Even the 1st respondent preferred another revision application before the state government. By judgment and order dated 29th July 1994, the state government dismissed both the revision applications. Being aggrieved by the aforesaid orders passed by the Assistant Registrar, the Divisional Joint Registrar and the State Government, the petitioner has filed the present petition under Article 226 and 227 of Constitution 5 wp-1153.95 of India. 5. The question which arises for consideration in this Petition is whether the amount deducted by the 2nd Respondent (Kohinoor Mills) from the wages of its employees on the basis of the tripartite agreement in accordance with Section 49 of the said Act of 1960 can be recovered from the Petitioner. 6. Learned counsel appearing for the Petitioner invited attention of the Court to the relevant provisions of the said Act of 1983 and in particular, Sub- section (7) of Section 3 thereof. It was submitted that under the said provision, the liability incurred by the 2nd Respondent before the appointed day was not enforceable either against the Central Government or the custodian appointed by the Central government. The learned counsel appearing for the Petitioner also invited attention of the Court to the relevant provisions of the said Act of 1995 and in particular Sub-section (1) of Section 5 of the said Act. Her contention is that in view of Sub-section (1) of Section 5 of the said Act of 1995, the petitioner will not be liable. She submitted that the clause © of subsection 2 of section 5 will have no application as the amount is being claimed not by the employees but by the 1st Respondent. The learned counsel also pointed out relevant provisions of the said Act of 1995 under which the 1st Respondent will have to lodge a claim for recovery of the amount due and payable by the owner of the Textile Undertakings. The learned counsel relied upon a decision of the Apex Court in 6 wp-1153.95 the case of Rashtriya Mill Mazdoor Sangh v. National Textile Corporation ( South Maharashtra ) Limited and Others ( AIR 1996 SC 710). The learned counsel also relied upon a decision of the Division Bench of this Court in the case of Rasiklal Ratilal (Partnership) Firm v. Union of India & Others ( 1992 I CLR 252 ). Reliance is also placed on a decision of the Division Bench in the case of National Textile Corporation (S.M.) Limited v. Girdharisingh Pratap Singh & Ors., ( 1997 II CLR 662 ). Reliance is also placed on a decision of the division Bench of this Court in the case of The National Textile Corporation (South Maharashtra ) Ltd. vs. Shramik Janata Union & others decided on 31st August, 1990. Learned counsel submitted that the liability of 2nd Respondent or the owner of the erstwhile undertaking of Kohinoor Mills cannot be fastened against the Petitioner. 7. The learned counsel appearing for the 1st Respondent submitted that the amounts sought to be recovered by the 1st Respondent are due and payable in accordance with Section 49 of the said Act 1960. He submitted that admittedly there was a tripartite agreement executed under Sub-section (1) of Section 49 of the said Act of 1960 under which the 2nd respondent has deducted certain amounts from the wages payable to its employees. He submitted that the said amounts collected by the 2nd respondent were admittedly payable to the 1st respondent. He relied upon Sub-section (2) of Section 49 and submitted that as per the agreement executed under Sub-section (1) of Section 49 of the said Act of 1960, the employer was under an obligation to make deduction and to pay the 7 wp-1153.95 amounts so deducted to the 1st Respondent Society as if it was a part of wages payable by the employer as required under the Payment of Wages Act, 1936 on the day on which the employer made payment. He submitted the liability of the employer arose not only out of the agreement contemplated by Sub-section (1) of Section 49 of the said Act of 1960 but the liability also arose under the said Act of 1936 and what is payable to the Society is a part of the wages. In this context, he relied upon Clause (c) of Sub-section (2) of Section 5 of the said Act of 1995 which provides that any liability arising in respect of wages, salaries and other dues of employees of the Textile Undertakings shall be of the Central Government and shall be discharged on behalf of the Central Government by the National Textile Corporation as and when the repayment of the said amount becomes due. He submitted that in view of Sub-section (2) of Section 49 of the said Act of 1960, the liability of the employer is under the said Act of 1936 and the amount sought to be recovered forms part of the wages of the employees. The learned counsel, therefore, submitted that the liability was of the Petitioner. He placed reliance on a decision of the Division Bench of this Court in the case of New Phaltan Sugar Works Limited & Others v. State of Maharashtra & Others (2004(3) Mh.L.J. 266) and submitted that in the case where the liability arose under Section 49 of the said Act of 1960, this Court held that the proceedings for recovery of the said amount by the co-operative credit society are in the nature of proceedings for recovery of wages which are deducted by the employer and therefore, in such a case, the bar created by Section 22 of the Sick Industrial Companies ( Special 8 wp-1153.95 Provisions) Act, 1985 will have no application. The learned counsel also relied upon the fact that the liability of the employer i.e. the 2nd Respondent arose under the provisions of the Payment of Wages Act. The learned counsel appearing for the 1st Respondent, therefore, submitted that the authorities under the said Act of 1960 have taken correct view of the matter and the amount which is admittedly deducted by the owner of the Textile Undertakings from the wages payable to its employees has to be paid to the 1st Respondent. He, therefore, submitted that no interference be called for in writ jurisdiction especially when there is no dispute regarding entitlement of the 1st Respondent to receive the amount. 8. I have given careful consideration to the submissions. Perusal of the application filed by the 1st Respondent- Society shows that a sum of Rs. 10,12,276.46 was collected by the 2nd Respondent which was payable to the 1st Respondent on or about 10th January, 1982. The said specific averment is found in the application dated 9th January, 1985 made by the 1st Respondent where a claim has been also made for payment of damages and/or interest on account of delayed payment. Thus, the liability is admittedly of a period prior to coming into force of the Textile Undertakings ( Taking Over of Management ) Ordinance, 1983. Under Section 3(1) of the said Act of 1983, the Management of the Textile Undertakings of Kohinoor Mills vested in the Central Government. Section 3 of the said Act of 1983 reads thus:- 9 wp-1153.95 “3. Management of certain textile undertakings to vest in the Central Government.- (1) On and from the appointed day the management of all the textile undertakings shall vest in the Central Government. (2) The textile undertaking shall be deemed to include all assets, rights, lease-holds, powers, authorities and privileges of the textile company in relation to the said textile undertaking and all property, movable and immovable, including lands, buildings, workshops, projects, stores, spares, instruments, machinery, equipment automobiles and other vehicles, and goods under production or in transit, cash balances, reserve fund, investments and booklets and all other rights and interests in or arising out of such property as were, immediately before the appointed day, in the ownership, possession, power or control of the textile company whether within or outside India and all books of account, registers and all other documents of whatever nature relating thereto. (3) Any contract, whether express or implied, or other arrangement, in so far as it relates to the management of the business and affairs of the textile undertakings and in force immediately before the appointed day, or any order made by any Court in so far as it related to the management of the business and affairs of the textile undertaking and in force immediately before the appointed day shall be deemed to have terminated on the appointed day. (4) All persons in charge of the management, including persons holding offices as directors, managers or any other managers or any other managerial personnel, of the textile company in relation to the textile undertaking immediately before the appointed day, shall be deemed to have vacated their offices as such on the appointed day. (5) Notwithstanding anything contained in any other law for the time being in force no person in respect of 10 wp-1153.95 whom any contract of management or other arrangement is terminated by reason of the provisions contained in sub-section (3), or who ceases to hold any office by reason of the provisions contained in sub- section (4), shall be entitled to claim any compensation for the premature termination of the contract of management or other arrangement or for the loss of office, as the case may be. (6) Notwithstanding any judgment, decree or order of any court, tribunal or other authority or anything contained in any other law ( other than this Act ) for the time being in force, every receiver or other person in whose possession or custody or under whose control the textile undertaking or any part thereof may be immediately before the appointed day, shall on the commencement of this Act, deliver the possession of the said undertaking or such part thereof, as the case may be, to the Custodian, or where no Custodian has been appointed, to such person as the Central Government may direct. (7) For the removal of doubts, it is hereby declared that any liability incurred by a textile company in relation to the textile undertaking before the appointed day shall be enforceable against the concerned textile company and not against the Central Government or the Custodian.” 9. The National Textile Corporation was appointed as the Custodian by the Central Government. Sub-section (7) of Section 3 was considered by the Apex Court as well as this Court. In the case of Rasiklal Ratilal (supra), it was held by this Court that the liability incurred by the Textile Undertakings prior to 18th October, 1983 can be enforced only against the concerned Textile companies and not against the Central Government. In the case of National Textile 11 wp-1153.95 Corporation (South Maharashtra ) Limited v. Girdharisingh Pratap Singh (supra), this Court had an occasion to interpret Sub-section 7 of Section 3. This was a case where the workmen had made an application under Section 33-C(2) of the Industrial Disputes Act, 1947 against the National Textile Corporation and against the managing director of a textile mill the management of which was taken over under the said Act of 1983. The claim for arrears of wages was for a period ending with the 19th October, 1983. The defence of the National Textile Corporation was that as the claim of the workmen was for a period prior to the appointed day under the said Act of 1983, the same was not enforceable against the Central Government or the said National Textile Corporation. The Labour Court held that the National Textile Corporation was liable to pay the dues of the workmen. This Court considered the law on the said aspect and interpreted the expression “any liability” under Sub-section 7 of Section 3 of the said Act of 1983. In Paragraph 12 of the said judgment, this court held thus:- “12. .....The expression “any liability” occurring in Sub- section (7) of Section 3 is an expression of wide connotation and import and it covers and comprehends every pecuniary obligation that may have been incurred by the textile company in relation to the textile undertaking before the appointed day by way of employment, business, commercial or trading activity and is not confined to commercial, business or such like liability as sought to be urged by Mr. Kochar. If the erstwhile textile company did not pay the wages which became due to the workmen, prior to its taking over, obviously it was pecuniary obligation of the erstwhile company and such obligation has to be discharged by the 12 wp-1153.95 erstwhile company under Section 3(7) of the Act of 1983. The Apex Court in Reshtriya Mill Mazdoor Sangh has held that the gratuity payable to a workman prior to the appointed day is a liability incurred by erstwhile textile company, a fortiori the outstanding wages to a workman prior to taking over is also a liability incurred by the erstwhile textile company. The discussion by the Apex Court in paragraphs 10 and 11 of the report in Rashtriya Mill Mazdoor Sangh case is complete answer to the contention of Mr. Kochar, and, I have no hesitation in holding that the claim made by the workmen in the application under Section 33-C(2) relating to arrears of wages, bonus and leave wages prior to taking over is covered under the expression ‘any liability’ under Section 3(7) of the Act of 1983. In view of the discussion aforesaid, the order passed by the Labour Count cannot be sustained and has to be set aside.” (Emphasis added) 10. Even in the case of Rashtriya Mill Mazdoor Sangh (supra), the Apex Court held that the liability in respect of gratuity payable to an employee who ceased to be an employee prior to takeover of management of an undertaking of a textile undertaking was that of the company which was the owner of the textile undertaking and not of the National Textile Corporation. 11. Thus, the legal position is that before coming into force of the said Act of 1995, neither the Central Government nor the Custodian under the said Act of 1983 were liable to discharge liability incurred by the the concerned textile undertaking before the appointed day under the said Act of 1983. In short, the liability of the textile companies arising before the appointed day cannot be enforced against the Central Government or the custodian. As 13 wp-1153.95 pointed out earlier, even according to the case of the 1st Respondent, the entire amount claimed by the 1st respondent was deducted by the 2nd Respondent- company prior to the appointed day. Thus, in view of said Act of 1983, the Petitioner is not liable. The Division Bench in the case of New Phaltan Sugar Works(supra) was not dealing with the effect of the said Acts of 1983 and 1995. 14. Now, the other question which arises for consideration is what is the effect of Section 5 of the said Act of 1995. Sub-sections (1) and (2) of Section 5 of the said Act of 1995 read thus:- “5(1) Every liability, other than the liability specified in sub- section (2), of the owner of a textile undertaking, in relation to the textile undertakings in respect of any period prior to the appointed day, shall be the liability of such owner and shall be enforceable against him and not against the Central Government or the National Textile Corporation. (2) Any liability arising in respect of -- (a) loans advanced by the Central Government, or a State Government, or both, to a textile undertaking (together with interest due thereon) after the management of such undertaking had been taken over by the Central Government under section 3 of the Textile Undertakings ( Taking Over of Management ) Act, 1983, or as the case may be, under section 3 of the Laxmirattan and Atherton West Cotton Mills ( Taking Over of Management) Act, 1976; (b) amounts advanced to a textile undertaking [ after the management of such undertaking had been taken over by the Central Government u8nder section 3 of the Textile Undertakings ( Taking Over of Management ) Act, 1983, or as the case may be, under section 3 of the Laxmirattan and 14 wp-1153.95 Atherton West Cotton Mills ( Taking Over of Management ) Act, 1976 ], by the National Textile Corporation or by a state textile corporation, or by both, together with interest due thereon; (c) wages, salaries and other dues of employees of the textile undertaking, in respect of any period after the management of such undertaking had been taken over by the Central Government, shall, on and from the appointed day, be the liability of the Central Government and shall be discharged for and on behalf of that Government, by the National Textile Corporation as and when repayment of such loans or amounts becomes due or as and when such wages, salaries or other dues become due and payable. “ 15. Learned counsel appearing for the 1st Respondent has made extensive submissions based on phraseology used in Section 49 of the said Act of 1960 and especially Sub-sections (1) and (2) thereof regarding nature and character of the amount required to be deducted by the employer on the basis of the agreement executed under Sub-section (1) of Section 49 of the said Act of 1960. The contention of the learned counsel appearing for the 1st Respondent is that the amounts deducted in accordance with the agreement are payable to the 1st respondent credit society as if it were a part of wages payable by an employer under the Payment of Wages Act, 1936. Sub-section (1) of Section 5 lays down that except the liability specified in subsection (2), every liability of the owner of a textile undertaking in relation to the textile undertakings in respect of any period prior to the appointed day shall be the liability of the owner of the textile 15 wp-1153.95 undertaking. The section provides that such liability shall be enforceable against the owner and not against the Central Government or the National Textile Corporation. 16. Learned counsel appearing for the 1st Respondent laid emphasis on clause (c) of Sub-section (2) of Section 5 of the said Act of 1995. The said clause is applicable to wages, salaries, and other dues of employees of the textile undertaking, in respect of any period after the management of such undertaking has been taken over by the Central Government. Thus, what is excluded by clause (c) of Sub-section (2) of Section 5 from the purview of subsection 1 of section 5 of the said Act of 1995 is any liability on account of wages and salaries of the employees of the Textile Undertakings in respect of any period after the management was taken over by the Central Government. In the present case, the liability has not arisen after take over by the Central Government. Therefore, clause (c) of Sub-section (2) of Section 5 of the said Act of 1995