Case: Shivanand Gaurishankar Baswanti Vs. Laxmi Vishnu Textile Mills &amp; Others

3. The case has a chequered history and with a view to appreciate the contentions raised by the parties, the background is required to be kept in view. Laxmi Vishnu Textile Mills (`Company for short)—respondent No.1 herein was formerly known as Vishnu Cotton Mills Ltd. It was registered on May 19, 1908 under the Indian Companies Act, 1873 (then in force). It was operating through two cotton textile mills, namely, (i) Laxmi Mill, and (ii) Vishnu Mill. Somewhere in the year 1961, Laxmi Mill was merged in Vishnu Mill and was given the present name i.e. Laxmi Vishnu Textile Mills Ltd. There were large number of workers in the mill and there was considerable profit in the business. By the passage of time, however, the Company started incurring losses and things turned worse in later eighties. Proceedings under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to `SICA) had been initiated. On April 28, 1994, the Board of Industrial and Financial Reconstruction, New Delhi (`BIFR for short) issued an order declaring the Company as `sick unit and in exercise of powers conferred on it under Section 22A of the Act, it restrained the promoters/management from disposing or transferring its assets described in the order without prior permission of the Board. It was also stated that violation of the order passed by the Board would be dealt with under Section 33 of SICA4. It is also the case of the appellant that without issuing notice and without obtaining permission from the Appropriate Authority as required under Sections 25-O and 25-N of the Industrial Disputes Act, 1947, the management of the Company resorted to illegal closure and lockout of the Company. Thus, from February 28, 1995, the Company is illegally closed5. According to the appellant, BIFR considered the facts and circumstances of the case in their entirety and on December 30, 1996 passed an order recording its satisfaction as required by sub-section (1) of Section 20 of the Act that it was not possible for the Company to revive and it was just and equitable that Company should be wound up. The opinion was forwarded to the High Court of Judicature at Bombay with a request that banks and financial institutions may explore the possibility of sale of the assets of the Company. It was proposed to entrust the work of sale of assets to State Bank of India (SBI), the lead bank in the case. The Operative Agency (OA), namely, IDBI was directed to hold a joint meeting of all participating banks and financial institutions and to furnish a detailed report on sale of assets of the Company through SBI latest by February 28, 19976. It may be stated at this stage that SBI was one of the major creditors. It initiated recovery proceedings against the Company by filing Original Application No. 2638 of 1999 and got a decree from Debt Recovery Tribunal (DRT)-1, Mumbai for a sum of Rs.84.39 crores with interest. Other financial institutions had also initiated proceedings for recovery of their dues. Receiver was appointed by DRT-1, Mumbai, who took possession of the properties of the Company. Steps were also taken to protect properties by employing police force. The Receiver also met representatives of Rashtriya Girni Kamgar Sangh, recognized Union--respondent No.8 herein. The Receiver was in possession of the property except those properties which were occupied by the employees who were in service of the Company and were residing in the quarters provided to them while they were in employment. Possession of the machinery and other movable properties of the Company was also taken over. Since the dues of workers were neither settled nor paid, several workers approached Controlling Authority under the Payment of Gratuity Act, 1972 for gratuity. Orders were passed in their favour directing the Company to pay full amount of gratuity with interest thereon. The said amount was also not paid. Meanwhile, Trans Asia Global Company--respondent No.7 expressed its desire to purchase the property. According to the appellant, respondent No.8--Union had no authority to represent the interests of workers of respondent No.1--Company and yet on March 8, 2005, it purportedly entered into a tripartite agreement with respondent No.1--Company, respondent No.8--Union and respondent No.7-M/s Trans Asia Global Company. Respondent No.1- Company under the tripartite agreement sold the property to respondent No.7 for Rs.46.65 crores. The claim of the workmen was settled at Rs.22.21 crores whereas in fact, the claim of the workmen was more than Rs.132 crores. The purported agreement never brought to the notice of the workmen and they were kept in complete dark. The property of the Company was worth Rs.250 crores which could have satisfied claims of SBI, legitimate dues of the workmen as also of financial institutions and other creditors. According to the appellant, the other agreement was also entered into between secured and unsecured creditors, labour representatives, the Company and the purchaser on April 20, 2005. The agreement states that all secured creditors, unsecured creditors and representatives of the workmen had a meeting and they all agreed on One Time Settlement (OTS) and accepted the scheme of selling the entire property by a private treaty to respondent No.7 and accordingly the property was sold. The action, however, was totally illegal, uncalled for and in contravention of various provisions of lawPIL WRIT PETITION7. According to the appellant, as soon as he came to know about the above agreements, sale of property by private negotiations and without taking workers in confidence, he submitted a representation to the Chief Justice of High Court of Bombay pointing out several illegalities committed by respondent No.1--Company in not settling the dues of workmen. The representation was converted into Public Interest Litigation (PIL) and was registered as PIL Writ Petition No. 126 of 2005. The appellant herein filed an affidavit in the said petition on June 27, 2006. The writ petition came up for hearing before a Division Bench of the High Court on July 13, 2006 and after hearing learned counsel for the parties, the writ petition was disposed of by the Court observing that the grievance of the workers could be redressed before `appropriate forum. The complaint against sale of property by private treaty also could be adjudicated in `proper proceedings and the controversy did not deserve to be taken into PIL. Liberty, however, was granted by the Court to all aggrieved parties to pursue `appropriate remedy for redressal of their grievancesPRESENT WRIT PETITION8. The appellant, thereafter, filed present Writ Petition No. 5664 of 2006 in the High Court of Bombay under Article 226 of the Constitution and prayed for a writ of certiorari or any other appropriate writ, direction or order quashing all the actions in the matter of recovery proceedings before the Recovery Officer, Mumbai Debt Recovery Tribunal No.1 and by examining the validity, propriety and correctness of such proceedings and to quash and set aside order of sale of properties --movable and immovable--of respondent No.1-- Company in favour of respondent No.7. A writ of mandamus was sought directing DRT-1, Mumbai not to disburse any amount to anyone till the claims of the workers have been properly 1 adjudicated and the amount paid. A prayer was made to continue to employ all workers till their services are legally terminated or till lawful closure is effected. Interim relief was also prayedORDER OF HIGH COURT9. The High Court, as observed above, dismissed the writ petition observing that it was not a fit case to interfere with by an order dated February 12, 2007 in exercise of extraordinary jurisdiction under Article 226 of the Constitution. The said order is challenged by the appellant in this appeal10. Notice was issued by this Court on September 7, 2007 and meanwhile order passed by DRT was stayed. Affidavits and further affidavits were thereafter filed by the parties. The Registry was directed to place the matter for final disposal and that is how the matter is before us

Reasoning:
MERITS OF THE MATTER18. On merits also, we find no substance in the contention raised by the learned counsel for the appellant. From the record, it is clear that from eighties the respondent No. 1- Company was in financial doldrums. Day-by-day, the position deteriorated and it had incurred heavy losses. So much so that the Mill was required to be closed down somewhere in 1995. Admittedly, after February, 1995, the Company has never revived. It is also clear from the record that substantial amount was due and payable by the Company to State Bank of India, several other financial institutions, secured and unsecured creditors and to workers. Proceedings had been initiated under SICA. BIFR had passed orders from time to time and finally it recommended winding up of the Company on being satisfied that rehabilitation of the Company was not possible. A recommendation was, therefore, made and papers were forwarded to the High Court concerned, i.e. the High Court of Judicature at Bombay. It is further clear that in favour of one major creditors, i.e. State Bank of India a decree was passed by DRT-I, Mumbai for Rs.84.39 crores with interest thereon. It has been brought on record that several other financial institutions had approached DRT and either orders were passed in their favour or proceedings were pending. It is brought to our notice that many workers had gone to Controlling Authority under the Payment of Gratuity Act, 1972 and obtained orders in their favour directing the first respondent Company to pay gratuity with interest thereon. The Company was not in a position to pay entire dues. In the circumstances, DRT-I, Mumbai ordered to take appropriate steps so that joint meeting of all financial institutions and representatives of workers be held and the matter could be settled. Meanwhile, respondent No. 7-Trans Asia Global Trade expressed its desire to purchase the property. On March 8, 2005, a tripartite agreement had been arrived at between respondent No. 1-Company, representatives of respondent No.8-Union of workers and Trans Asia Global Trade-intending purchaser. In the agreement it was stated that the Company had huge liability and there were several secured creditors. The property owned by the Company was not enough to meet with all liabilities. The representatives of respondent No.8 Union were aware of the said fact and agreed to accept amount of Rs.22.21 crores towards full and final settlement of dues of workers. Respondent No. 7 decided to purchase the property for Rs.46.65 crores. The agreement was executed on March 8, 2005 and signed by all the three parties to the agreement, i.e. by the Mill-Company, by the purchaser of property and also by representatives of respondent No.8 Union. A joint meeting of secured and unsecured creditors was also held on April 20, 2005 wherein secured and unsecured creditors of the first respondent-Company agreed to share sale proceeds of Rs.46.65 crores by accepting and finalizing One Time Settlement (OTS). Final decision was taken on the basis of the agreement arrived at earlier on March 8, 2005. It was decided to sell the property to respondent No.7 for Rs.46.65 crores. The amount which was to be paid as per the final agreement19. On October 6, 2005, an order was passed by Recovery Officer, DRT-I, Mumbai in which all the above facts had been stated. The Recovery Officer referred to tripartite agreement and payment of amount to creditors and workers. The order also recited that as per the direction of the High Court, the workers claim was to be adjudicated by DRT. The applicant Bank was, therefore, directed to issue advertisement and invite workmen as per the guidelines formulated by DRT. All the workers were directed to lodge their claims in appropriate format in the Tribunal and all such claims were ordered to be placed before the Presiding Officer for adjudication20. Regarding valuation of property, it was stated;the valuation was done in the year 2002, before considering the proposal, the property was valued again from the approved valuer from the panel of DRT. According to the valuation report, offer of the purchaser is above the distress valuation price21. It was mentioned that the Tribunal accepted the offer of M/s Trans Asia Global Trade for purchasing movable and immovable property of the Company in the custody of Receiver appointed by DRT for an amount of Rs.47.82 crores. The auction-purchaser had deposited the amount of Rs.47,81,57,777 towards sale consideration and other expenses. The recovery officer directed the purchaser to pay balance amount. The matter was adjourned for confirmation of sale. An order was passed to send report to BIFR after confirmation of sale. The above order has not been challenged by the appellant in accordance with the provisions of 1993 Act22. On December 6, 2005, again, the matter was placed before the Recovery Officer, DRT-I, Mumbai. Reference was made to all proceedings, settlement arrived at between the parties and sale of property for Rs.47.82 crores. It was noted that no objection had been received from any person under Rule 60, 61 or 62 of the Second Schedule to the Income Tax Act, 1961 for setting aside sale and the sale was required to be confirmed. Accordingly, the sale was confirmed. Even this order was not challenged under the Act23. On January 20, 2006, the Recovery Officer, DRT-I, Mumbai issued a sale certificate for immovable property for Rs.45 crores in favour of respondent No.7-Purchaser. Another certificate of sale for movable properties for Rs.2.82 crores was issued by DRT. Those orders have remained unchallenged except in the present proceedings26. But even on merits, the impugned action calls for no interference. The order dated April 28, 1994 passed by BIFR reads as under;a draft scheme for rehabilitation of M/s Laxmi Vishnu Textile Mills has been prepared, circulated and published by the Board under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1935 in pursuance of its proceedings held/orders face in the case on 14.2.1994And whereas, the Board is of the opinion that in the interest of rehabilitation of the sick industrial company, creditors, shareholders as also in public interest, it is necessary to direct the existing promoters/management of sick industrial company; M/s Laxmi Vishnu Textile Mills not to disposed of, except with the consent of the Board, any of its fixed and other assets charged/hypothecated to the financial institutions, banks and other creditors, the board, in exercise of powers conferred on it by Section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 hereby directs the existing promotersmanagement is invited to the provisions of Section 33, where under violation of any of the orders of the Board is punishable in the manner laid down therein27. Plain reading of the order makes it clear that the Board was of the opinion that in the interest of rehabilitation of the sick industrial company, its creditors, shareholders as also in public interest, certain directions were necessary. The Company was, therefore, restrained from disposing the property which was charged /hypothecated to financial institutions. The submission of the learned counsel for the contesting respondents is that there was no question of revival of the Company in view of order passed by BIFR in 1996 and its recommendation for winding up of the Company. Regarding interests of creditors and other persons, it was stated that in March, 2005, tripartite agreement had been arrived at wherein representatives of labour Union, first respondent-Mill Company and the purchaser were present and the agreement was signed by all of them. Likewise, in April, 2005, joint meeting of secured and unsecured creditors, representatives of Union and vendor and vendee was held and all of them agreed for OTS and expressed their willingness to accept lesser amount. In the circumstances, charge imposed and prohibition issued by BIFR on the Company no more remained operative. On October 6, 2005, therefore, it was observed by the Recovery Officer of DRT-I, Mumbai to send information to BIFR after confirmation of sale. Consequential action of confirmation of sale was thereafter taken on December 6, 2005 and sale certificate was also issued on January 20, 2006. All the actions were taken only after March/April 2005. They, therefore, could not be said to be contrary to law or in violation of the order passed by BIFR28. Even otherwise, on the facts and in the circumstances of the case, we are fully satisfied that had the agreements in question not been arrived at, all parties including workers for whom great concern had been shown by the appellant would have suffered. In fact, in an affidavit filed on behalf of the State Bank of India, it was stated that in the light of the decree passed in favour of State Bank of India by DRT-I, Mumbai, the Bank would be entitled to Rs.222.34 crores. Similarly, other institutions were also entitled to substantial amount. It was because of conjoint and combined efforts of all the parties that agreements could be arrived at. It was stated that a Cabinet Minister used his good offices and One Time Settlement (OTS) had been arrived with Banks and financial institutions and workmen were able to get the amount which had not been paid to them for many years. The contention that secured and unsecured creditors and workers have not received their dues has no force29. Again, who has approached this Court?Neither a secured nor an unsecured creditorNor a representative of a labour union. Nor even a person acting pro bono publico. As already adverted to earlier, PIL Writ Petition at the instance of the appellant was dismissed by the High Court and the said decision was never challenged by him. Here is an employee who is also one of the workers, who has been paid his dues. He accepted the amount of Rs.62,555/- and issued `No Objection Certificate (No Dues Certificate) -no doubt by putting an endorsement32. Even this contention has no force. The learned counsel for the Union, in our opinion, is right in submitting that under the Bombay Industrial Relations Act, 1946, it is the `Representative Union which has all powers to enter into a settlement on behalf of workers in the industry and it is only that Union which can take a decision under 1946 Act. The said decision would bind not only the members of the Union, but also to those workers who are not members of such Union33. The learned counsel, in this connection, invited our attention to various provisions of 1946 Act. As the Preamble of the Act declares, the Act has been enactedo regulate the relations of employers and employees, to make provision for settlement of industrial disputes and to provide for certain other. The Act contains elaborate provisions for registration of Unions and their powers47. Respondent No.8 in its affidavit asserted that it is a Representative Union under the Act of 1946, in Textile Industry in Sholapur Municipal Corporation Area. It was further stated that once a Representative Union exists in any industry in a given local area, it alone has the exclusive right to represent the entire class of workmen in that industry in the concerned local area. In the instant case in the local area of Solapur District, respondent No. 8 is admittedly the only Union which has the status of Representative Union in Textile Industry under the Act. In view of the above fact, no other Union/Association of employees or individual employees have right to represent the workmen of that industry in that area48. In the counter-affidavit, it was stated by the Representative Union that there were about 4500 employees in respondent No.1 Mill when it was closed down in February, 1995. Within a period of about a decade, 400 workmen had already died. None of them, however, received any wages or other benefits because of the pendency of several proceedings in different courts. The Representative Union considered their legitimate grievance and thought it proper to get the matter settled if reasonable amount could be paid to them, keeping in view well-known sayinge in hand is better than two on. They considered the matter in its entirety, financial condition of the first respondent-Company, claim of secured and unsecured creditors, a number of decrees and orders passed by various Authorities under different laws and the properties of the Company. In the larger interest, the Union decided to accept the amount of Rs.22.21 crores for workers towards full and final settlement. By no stretch of imagination, such action could be held improper, illegal or mala fide. We are of the view that the approach adopted and decision taken by the Representative Union-respondent No.8 suffers from no infirmity and cannot be regarded as illegal or otherwise unreasonable