Case: Official Liquidator,High Court,Bombay,Liquidator of M/S Glass Carboys and Pressed Wares Limited Vs. United Commercial Bank

K. SUKUMARAN, J. ( 1 ) WORKERS versus Secured Creditors could be the cause title of this case. It is a class conflict, which has surfaced in the winding up planes of the corporate sector. Both sides have fought with arms and ammunitions garnered from the provisions of the Companies Act, 1956. Who is the victor, and who the vanquished, is the final phase which spectactors could wish to see. Intermediate stratagems and tactics, and the fighting feats are, however, indispensable narratives required for the better appreciation of the final show. They are alluded to hereunder. ( 2 ) THE company, Glass Carboys and Pressedwares Ltd. ran into financial straits. Its winding up was sought and got, when it was unable to pay its debts. The winding up order was passed on 15-11-1972, in Company Petition No. 27 of 1971. ( 3 ) THERE were secured creditors, like the Maharashtra State Financial Corporation and United Commercial Bank. They could stand out side the winding up proceedings, and appropriate to them their secured rights from the assets of the company. United Commercial Bank filed a Suit No. 703 of 1975 before this Court. There was no defence; the decree passed on 22-4-1976. ( 4 ) PARALLEL proceedings were pursued in the winding up steps and in the Civil Suit. On the basis of the orders passed in the Company Petition, Official Liquidator took over the physical possession of the factory and other assets of the company. On the other hand, in pursuance of the decree of the Civil Court, a Commissioner appointed by the Court for taking accounts was directed to sell the assets of the company. The sale was accordingly conducted as regards the moveables. The certificate of sale is dated 11-4-1989.( 5 ) IN the mean- time, an important event had occurred in the legislative field. Parliament passed an amendatory Act, Act 35 of 1985, making a serious inroad into the existing provisions of the Companies Act and conferring substantial benefits on the quandom workingmen of the company. They are reflected in the structure of the statutory provisions of section 529 and 530, and the additional appearance of section 529-A. The workers got the right pari passu with those of the secured creditors over the corporate assets, under the amended provisions. The Official Liquidator was to function as the mouth piece and spokesman of the workmen. This duty was performed by the Official Liquidator by his letter dated 17-4-1989 addressed to the Commissioner to keep segregated the amounts covered by the claims of the workmen. The Commissioner demurred. The Official Liquidator then moved the company Judge for orders recognising and safeguarding the workers right. ( 6 ) BY order dated 29-8-1991, the prayer was declined by the company Judge. ( 7 ) THE secured creditors contended that it had a right, enabling it to enforce the security it held as against the company, keeping itself out of the arena of winding up proceedings. That was a vested right. A change in the position, in the absence of express enactment or necessary implicatory manifestation, could not be interferred. On behalf of the Official Liquidator, it was urged that on a plain reading of the section, and a simple implementation of its provisions, the workers claim would have to be honoured. Counsel for the Liquidator posed two questions as relevant in that context. (i) Is the company still in the processing of winding up (The question has been cast slightly differently in the order of the learned Judge. We have only substituted the words "winding up" as occurring in the section itself in place of "in liquidation", used by the learned Judge. There is no change in its content) (ii) Are the assets of the company still available, for the recognition of the rights, and the disbursement of the dues, of the workmen as claimed by the Official Liquidator ( 8 ) THE learned Judge agreed that the two questions did arise and that both of them could be answered in the affirmative, but held that as on 24-5-1985 when the amended provisions of the Act came into force, the secured creditors had vested rights and those rights could not be adversely affected.( 9 ) THE view so taken by the learned Judge is attacked in appeal. SECTION 529-A reads as follows :--sec. 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 estate 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 workmens 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 shall be applied rateably for the discharge of workmens 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 workmens portion in his security, whichever is less, shall rank pari passu with the workmens dues for the purposes of section 529-A. ( 10 ) ON the first question-whether the company is in winding up,-the answer is transparently in the affirmative. It has been so observed even by the learned Judge. The commencement of the winding up is signalled by section 441 of the Act. Doubtless it would start from the date of presentation of the petition for winding up. In certain cases, it could be even anterior. It is unnecessary to look into those situations, for the purpose of the present case. The winding up process is completed, latest by the time indicated in section 560 of the Act, when the Registrar is empowered to strike off the name of the company from the Register. The last traces of its corporate existence are wiped off of by that obsequious operation. All intermediate processes would come within the period of winding up. In the present case, even the disbursement of the assets had not taken place. The liquifaction of the assets had been partly achieved. No rights, however, had crystallized in favour of any person, in relation to the assets so available. It is at that stage that the statutory intervention, beneficent to the workers, takes place. Even without a retrospective exercise, the Parliamentary command about the modality of distribution could be obeyed in letter and spirit. It does not result in picking some ones pockets. Nothing had fallen into the pockets of either the strongly secured creditors or the weakly and wearied workmen. The question of unsettling settled rights does not arise in such a situation. The provisions of the amended Act will have to be given effect to, the moment it comes into force. There is no escape from it, for that is the Parliamentary will. When the meaning is plain. (interpretational interpellations are irrelevant ). The mere fact that the Legislature enacts an amendment is a clear indication of an intention to alter the earlier Law. A recent illustration of the proposition is evident from the decision of the Supreme Court dealing with the Benami Act which made violent changes in entrenched Indian concepts. The learned Judge erred in thinking that there was a disturbance of vested rights, and that it was impermissible to allow it in the absence of extra indication in the statute itself. Even without adventitious aids, the new section on its plain operation, could aid the workmen, and enable them to have some little copper, from out of the assets of an undertaking to which they had contributed by their sweat and their blood.( 11 ) THE question could be viewed from another angle as well. The amendment was intended to project a social goal for the protection of the weaker sections of the society. Courts are not to put unnecessary spokes in the wheels of social progress. It is expected to give push and pull, to enable the legislative to reach its destination. In the context of a similar social legislation-the Employees State Insurance Act, 1948-a Full Bench of the Kerala High Court speaking though one of us (Sukumaran, J. ,) observed: "such social welfare legislation should receive liberal construction as has been stressed by the Supreme Court in (Chairman, Board of Mining Examination v. Ranjee) 1977 (2) S. C. C. 256. We are comforted that such an approach and attitude have been adopted by the highest Court in the land and by other Courts, although in different factual situations. The approach and attitude are common and fundamental, notwithstanding the difference in the statutory provisions applicable in the case. " the decision was commented upon by an academic, as in the proper perspective and the right direction. ( 12 ) IN the light of the above discussion, we are clearly of the view that the learned Judge, erred in the interpretation he placed on the sections 529, 529-A and 530 introduced by the Amendment Act of 1985. That view has therefore to be reversed. We do so.

Decision reasoning: 1[ds]( 10 ) ON the firstthe company is in windinganswer is transparently in the affirmative. It has been so observed even by the learnedlearned Judge erred in thinking that there was a disturbance of vested rights, and that it was impermissible to allow it in the absence of extra indication in the statute itself. Even without adventitious aids, the new section on its plain operation, could aid the workmen, and enable them to have some little copper, from out of the assets of an undertaking to which they had contributed by their sweat and their blood.( 11 ) THE question could be viewed from another angle as well. The amendment was intended to project a social goal for the protection of the weaker sections of the society. Courts are not to put unnecessary spokes in the wheels of social progress. It is expected to give push and pull, to enable the legislative to reach its destination. In the context of a similar socialEmployees State Insurance Act,Full Bench of the Kerala High Court speaking though one of us (Sukumaran, J. ,) observed: "such social welfare legislation should receive liberal construction as has been stressed by the Supreme Court in (Chairman, Board of Mining Examination v. Ranjee) 1977 (2) S. C. C. 256. We are comforted that such an approach and attitude have been adopted by the highest Court in the land and by other Courts, although in different factual situations. The approach and attitude are common and fundamental, notwithstanding the difference in the statutory provisions applicable in the case. " the decision was commented upon by an academic, as in the proper perspective and the right12 ) IN the light of the above discussion, we are clearly of the view that the learned Judge, erred in the interpretation he placed on the sections 529,and 530 introduced by the Amendment Act of 1985. That view has therefore to be reversed. We do so.