Case: Grand View Estates Private Limited Vs. Vishwanath Namdeo Patil &amp; Others

viz (1) that after selling the assets of the Company and distributing the assets for paying off liabilities, the Company may still have surplus amount or in the alternative the liabilities would outweigh the amount realized by the sale of assets in which case even though both, workers and secured creditors had priority would have to accordingly rateably get their share out of assets and whatever remains would be distributed ratably amongst the other creditors. Therefore, in our view, the Official Liquidator would have to then consider whether there would be any surplus of assets over liabilities to see whether paripasu benefit could be given to the workers and take it to its logical conclusion. The Official Liquidator in such a case therefore would have to consider the last order of actual winding up of the Company as the order from the date of which the workers dues would have to be calculated. In our view, such purposive interpretation or purposes & objectives approach could harmonize the intention of the legislature in giving paripasu benefit to workers alongwith the secured creditors.39. In the present case the facts which are undisputed are as under:-The Appellants before this Court are not only the secured creditors but also the majority shareholders. The Appellant No.1 held from earlier 22.70% of the shares and is part of the Shahpoorji Pallonji Group, which is in turn part of the Tata Group which owned the Mill in liquidation. The Appellant No.2 is also a part of the Shahpoorji Palonji Group and engaged in real estate development construction and infrastructure business. It acquired 29.29% of the shares in 2010 after the Order of winding up, thus giving the Appellants together 52% of the equity shares of the Company. Similarly, after the order of winding up, in 2006 and 2007 the debts of the only two secured creditors, IDBI and Bank of Baroda, were assigned to the Appellant No.2, as also the debts of 70 out of the 146 unsecured creditors. Given the extent of the immovable assets yet to be sold, which include 48 acres of prime land in the heart of Mumbai City, after the sale of these assets there will be a surplus even after payment is made from the proceeds to the workmen and creditors. In this situation as per section 475 of the Companies Act, 1956, any surplus shall be distributed amongst the contributors. Once the winding up order is passed the shareholders as also the ex-directors become contributories (S.427 & S. 428 of the Companies Act, 1956). Thus any surplus in this matter will be distributed to the Appellants in their capacity as shareholders. If the date of calculation of dues is taken as the date of winding up, in matters where there is surplus like the present, the workmen will get a larger amount than they would if the cut-off date is taken as the appointment of the Provisional Liquidator. The dues of the secured creditor in the present matter grew at a phenomenal rate even after the de facto closure of the factory/ BIFR recommendation etc due to the fact that their decree from the DRT has grant in 2003 an amount, as of 13/01/2003, of Rs 27,46,04,358.24 (Rs 22,14,17,645/- + Rs 5,31,86,713.24) with future interest @ 16% p.a with quarterly rests. Given this staggering rate of interest, by 2011 this amount had grown to Rs 193,85,74,592/-. (report of Official Liquidator dated 12/07/2011, paras 46(ii) & 57(E).40. Since the immovable property of Svadeshi Mills admittedly has not been sold and it has a land of almost about 50 acres in the heart of the City which is a prime residential and commercial area, the Official Liquidator would receive substantial amount (approximately Rs 1000 crores) to say the least by sale of these assets. The Grandview Estates Private Limited which is a majority shareholder of the Company and whose SLP is pending in the Apex Court, if it is permitted to develop this property it would make substantial profit by developing the said land since it is a developer and builder and earn profit and also get its dues as per the decree passed by DRT wherein they are entitled to get the decretal amount with compound interest. Taking into consideration these facts, in our view, the legislative intention therefore would be taken to its logical conclusion. Therefore, it will have to be held that the date of the last order of the winding up of the Company would be the date from which the workers dues would be calculated and not the earlier date on which much emphasis is laid by the learned Senior Counsel appearing on behalf of the Appellants. In the facts and circumstances of this case therefore issue No. (a) framed in para 20 above is held to be in the affirmative. Issue Nos. (b) to (d) in the facts of the present case will have to be answered in the negative. The question framed in para 2, viz. :Whether, in an adjudication proceedings before the Official Liquidator, dues of the workers are to be calculated from the date of actual winding up of the Company by the Company Court or whether they should be calculated from the date of appointment of the Provisional Liquidator with full powers to sell the assets or from the date on which there is cessation of work on account of various valid legal reasonstherefore, will have to be held as under:Depends on the facts and circumstances of each case.41. In view of this it will not be necessary to go into the question as to whether permission has to be obtained by the Company or the Official Liquidator under Section 25-O(6) in order to stop the claim of the workers. We are, therefore, of the view that it is not necessary to interfere with the judgment and order passed by the learned Single Judge, though the reasons given by us are slightly different from the reasons given by the learned Single Judge.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]31. In our view, to some extent, there is a substance in the submission made by the learned Senior Counsel appearing on behalf of the Appellants that the date under section 445(3) cannot be the last date from which there would be cessation ofrelationship. In Carne and Another vs. Debono (1988) 1 W.L.R. 1107) in the facts of that case, it was observed by the Court of Appeal ascan now turn to the main point which the purchaser himself urged. It is clear on the masters finding that time was of the essence for the completion of the contract on 5 February. That being so, it is surprising to find no completion statement and no attempt to agree the sum due on completion until 10 minutes past 10 on that morning, apart from a telephone communication the previous day. What is more, in the respects that I have mentioned, the completion statement was wholly defective. What had proceeded in an extremely dilatory matter had suddenly become the most urgent procedure that I personally have come across; viz. No completion statement being provided until the very morning of the crucial day. The purchaser asks what was he to do : his solicitors were in funds but what had been asked from them was the payment of a sum which, on the face of the completion statement, was the wrong sum: The purchaser submitted , in effect, that the vendors were in breach of contract in that they failed to send in good time a completion statement specifying the right amount due. He also relied on special condition 12(h) which deems any notice given by other parties under the agreement to have been served on the expiration of 48 hours after it had been posted. Applying that to the faxed completion statement, he said it had to be deemed not to have been received until two days after the crucial date of 5 February.In our view, therefore, if the other dates are not applicable in the facts and circumstances of the case then, in that case, the date of winding up would be the date on which the relationship ofwould come to an end and from that date workmen would be entitled to get their legal dues. Therefore, there cannot be anyformula which can be arrived at by holding that the date under section 445(3) would be the only cut off date from which workers dues are to be calculated and in a given case, it is possible to hold that earlier date could be the cut off date for calculating the workers dues. To that extent, we disagree with the view taken by the learned Single Judge that date under section 445(3) would be the only date from which workers dues can be calculated.In our view, as we have pointed out hereinabove, while calculating the cut off date the facts in each case have to be taken into consideration. The Amendment Act of 1985 which amended various provisions of winding up proceedings is a beneficial piece of legislation which was brought about to give equal priority to the workers who had contributed to accumulation of capital and revenue of the Company. The Parliament amended the Act and held that the workers dues had a pari passu charge over the secured creditors dues. The import of the said amendment was to give equal status to workers as that of secured creditors. In a winding up proceedings, there could be two possible results viz (1) that after selling the assets of the Company and distributing the assets for paying off liabilities, the Company may still have surplus amount or in the alternative the liabilities would outweigh the amount realized by the sale of assets in which case even though both, workers and secured creditors had priority would have to accordingly rateably get their share out of assets and whatever remains would be distributed ratably amongst the other creditors. Therefore, in our view, the Official Liquidator would have to then consider whether there would be any surplus of assets over liabilities to see whether paripasu benefit could be given to the workers and take it to its logical conclusion. The Official Liquidator in such a case therefore would have to consider the last order of actual winding up of the Company as the order from the date of which the workers dues would have to be calculated. In our view, such purposive interpretation or purposesobjectives approach could harmonize the intention of the legislature in giving paripasu benefit to workers alongwith the secured creditors.In view of this it will not be necessary to go into the question as to whether permission has to be obtained by the Company or the Official Liquidator under Sectionin order to stop the claim of the workers. We are, therefore, of the view that it is not necessary to interfere with the judgment and order passed by the learned Single Judge, though the reasons given by us are slightly different from the reasons given by the learned Single Judge.