State Of U.P. And Anr vs Uptron Employees' Union Cmd-I And Ors

A few facts which are relevant may be noticed at the threshold. M/s. UPTRON is a company incorporated under the Companies Act, 1956 and is a subsidiary of U.P. Electronics Corporation, a company wholly owned and controlled by the State of Uttar Pradesh. UPTRON became a sick industry since its net worth became negative and, therefore, a Reference was made under Section 15 of The Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "SICA"). The Reference was made on 22.1.1994 and M/s. UPTRON was declared a sick industry on 19.8.1994. The Industry Finance Corporation of India (IFCI) was appointed the Operating Agency. It appears from the record that advertisements were issued in normal course inviting proposals for take over and/or revival of the sick unit. From the Order of the BIFR dated 27.8.1997 it appears that advertisement was issued pursuant to its order dated 29.1.1997 but no viable acceptable offer was received. The Company had proposed a one time settlement whereby it offered to pay off 100% of the principal amount and only 25% of the interest due. However, for whatever reasons this proposal made no progress in the absence of a confirmation by the State Government. M/s. UPTRON India Ltd. stated that it had made a fresh proposal which had been submitted to the Government and that the Government was likely to consider it on 1.9.1997. In these circumstances, the BIFR considered the matter and passed certain directions by its order of 27.8.1997. It directed the Operating Agency to make an indepth study of the proposal submitted by M/s. UPTRON to the State Govt, of Uttar Pradesh and to make its suggestions. It was directed to submit its report within 10 weeks after holding a joint meeting with the concerned parties. It also directed the Managing Director of M/s. UPTRON to discuss the matter further the concerned banks with a view to obtain their consent as to the minimum acceptable quantum of one time settlement and quantum of sacrifices in terms of waiver of interest. M/s. UPTRON was also directed to have discussions with the Chief Secretary of the Govt. of Uttar Pradesh in regard to the quantum of funds proposed to be inducted by the Govt. of Uttar Pradesh for revival/rehabilitation of M/s. UPTRON. The last direction made by the BIFR was in the nature of a direction to the Govt. of Uttar Pradesh to make arrangements for payment of salaries/wages of the workers till the proposed package of revival/rehabilitation of M/s. UPTRON was finalised by the BIFR. This last direction for payment of salaries/wages to the workers of M/s. UPTRON was challenged by the U.P. Electronics Corporation before the Appellate authority under SICA which was dismissed. Thereafter, the State of Uttar Pradesh filed a writ petition before the High Court of Delhi which was dismissed by order dated 9.9.1998. As noticed earlier, C.A. Nos. 6171-6172/1999 have been preferred against the aforesaid order of the High Court of Delhi.

In the same order the BIFR noted that the case had been before the Board since August, 1994 and no rehabilitation scheme could be finalised primarily on account of the State Government not being able to take a decision regarding infusion of funds for rehabilitation of the company. It, therefore, directed the Government of Uttar Pradesh to convey their decision positively within eight weeks to the Operating Agency and the BIFR whether it could induct Rs. 171.04 crores as envisaged in the scheme submitted by the Government of Uttar Pradesh for the revival of M/s. UPTRON. The Board also indicated that in case the State Government was not agreeable to provide the amount as aforesaid, the Bench may pass further appropriate orders which may include issue of show cause notice for winding up of the company without holding any further hearing. If the Govt. of Uttar Pradesh was willing to provide the necessary funds the directions would be made accordingly. Some other directions were made which we do not consider necessary to notice at this stage.

While the position stood thus, the M/s. UPTRON Employees Union - respondent No. 1 herein and two other associations of the workers and officers of M/s. UPTRON filed a writ petition before the High Court of Judicature at Allahabad, Lucknow wherein it was stated that the Cabinet of Uttar Pradesh had taken a decision of closure of M/s. UPTRON on 1.12.1998 as appeared from the press reports. The press report showed that M/s. UPTRON had incurred a loss to the tune of Rs. 330 crores which was not the correct figure. Having regard to the fact that financial institutions were willing to waive a part of the liability, the loss if any was only Rs.93 crores. Reliance was placed on a photocopy of news item published on 2.12.1998 in the Hindustan Times a local daily. In the writ petition it was prayed that a writ of mandamus be issued restraining the Govt. of U.P. from implementing the Cabinet decision of December 01, 1998. It was also prayed that a writ of mandamus be issued restraining the opposite parties from closing the Company without waiting for the decision of BIFR. It was also prayed that a suitable direction be issued to the opposite party to honour the order of BIFR dated 27.8.1997 for payment of salary to the employees of M/s.UPTRON. It is not necessary to notice the other prayers in the writ petition. In this writ petition an interim order was passed by the High Court on 23.12.1998. From a perusal of the order of the High Court it appears that the Additional Advocate General for the State objected to the maintainability of the writ petition inasmuch as the matter was pending before the BIFR. He also informed the Court that the State Government had not passed any order regarding closure of M/s. UPTRON. This was controverted by the writ petitioners who asserted that such a decision had been taken by the Cabinet and in fact the Principal Secretary (Electronics) of the State of U.P. had passed an order on 9.12.1998 for the rehabilitation of the workers. The High Court noticed the submission urged on behalf of the State Government that it had not yet taken a final decision to close M/s. UPTRON and the matter was being considered by the BIFR, and the State Government had been asked to indicate as to whether it was in a financial position to revive the unit. The High Court passed an interim order in view of the aforesaid circumstances directing the State Government to pay salary to the workers pursuant to the order passed by the BIFR till the State Government took a final decision in that regard. C.A. Nos. 6216-6217/1999 have been preferred against the said interim order of the High Court of Judicature at Allahabad, Lucknow Bench, Lucknow.

It would, thus, appear that this Court did not lay down any principle of law of universal application and passed appropriate orders only in the compelling circumstances noticed by it. We are, therefore, satisfied that in respect of a sick industrial company, even if it be a subsidiary of a government company, there is no legal obligation cast upon the State Government to pay the wages due to the workmen. The rights of workmen are governed by the relevant provisions of the Companies Act where their claim has been accorded priority. Moreover, in any view of the matter we find nothing in SICA which authorises the BIFR to pass an interim order directing the State Government in such circumstances to pay the wages due to the employees of the sick industrial company. We, therefore, allow all these appeals and set aside the impugned orders.

These appeals are, accordingly allowed with no order as to costs.

We do hope and trust that the BIFR will now take up the matter and dispose of the proceedings within a short period, say, within a period of six months from the date of receipt of a copy of this order or its production by any of the parties before it. Similarly, the writ petition pending in the High Court should also be disposed of as early as possible and preferably within a period of six months from today.