Shivanand Gaurishankar Baswanti vs Laxmi Vishnu Textile Mills & Ors

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 3 (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 SICA.

4. 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 closed.

5. 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, 1997.

6. 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 6 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 7 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 law.

7. 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 9 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 grievances. PRESENT WRIT PETITION

10. 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.

15. It was submitted that the situation today is irreversible inasmuch as after the settlement had been arrived at between the parties, the purchaser-respondent No.7 had 1 deposited the entire purchase price with DRT. The secured creditors as well as labourers were paid their dues as per the said settlement and their respective shares. Creditors had issued `discharge certificates'. The Assistant Labour Commissioner had disbursed the amount to the workers and their family members who are more than four thousand. The appellant who was also one of the workers was paid more than Rs.60,000/- and he issued a receipt in token of acceptance of the said amount. The order of sale in favour of respondent No.7 was confirmed by DRT and the sale became final. Sale certificate was also issued in favour of the purchaser. It had also paid an amount of Rs.2.25 crores towards stamp duty and got the property registered in its name. All those orders were never challenged by the appellant by taking `appropriate proceedings'. If at this stage, this Court interferes and sets aside the orders passed by the authorities from time to time, irreparable injury and loss would be 1 caused not only to the purchaser-respondent No.7, but to other respondents as well. For instance, it would be very difficult for the workers who had received the amount to refund or pay back the said amount which would be the direct consequence. It would be difficult for respondent No.7 also if it will not be able to recover the amount which it has paid. Moreover, no secured or unsecured creditor has come forward and has made a complaint to this Court that though he was entitled to a particular amount, he had not been paid and he has grievance against the settlement. The appellant who is only one person and has received his dues, has approached the High Court under Article 226 of the Constitution after dismissal of Public Interest Litigation and it is he who contends that several creditors have not been paid their dues and workers have also suffered and the settlement should be set aside. It was submitted that the High Court was right in not entertaining such petition and this Court, in 2 exercise of power under Article 136 of the Constitution, may not interfere with the said order.

passed by Recovery Officer, DRT-I, Mumbai in 2 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 adjudication.

21. It was mentioned that the Tribunal accepted the offer of M/s Trans Asia Global 2 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 Act.

54. We have elaborately dealt with the facts of the present case. Respondent No.1-- Company was closed down in February, 1995. It never started functioning thereafter. Financial 5 liability continued mounting up day by day. There were several secured and unsecured creditors and dues of workers. Proceedings under SICA had been initiated, decrees and orders were passed against the Company and the property owned by the Company was not sufficient to clear up all debts and liabilities. Keeping in view the entire facts and circumstances that initially, tripartite agreement was entered into between respondent No.1-Company, Representative Union and intending purchaser on March 8, 2005, a joint meeting was held between secured and unsecured creditors, representatives of the Union, the Company and the purchaser in April, 2005 and in that meeting, One Time Settlement (OTS) had been reached. Several actions were taken in pursuance of the settlement. The amount was deposited by the purchaser, dues of creditors were paid, workers and laborers were informed and they were also paid the amount. The property was sold by respondent No.1 to 6 respondent No.7 on October 6, 2005, sale was confirmed on December 6, 2005, possession of the property was given to respondent No.7 on December 14, 2005, sale certificate was issued on January 20, 2006, respondent No.7 got the property registered in its name on January 30, 2006 by paying stamp duty of Rs.2.25 crores, secured creditors gave discharge to respondent No.1-Company on March 30, 2007. By May 17, 2007, 4054 workers were paid and the said figure, at the time of hearing of this appeal reached to 4105. It was also stated by respondent No.7-purchaser that plant and machinery were removed and sold as scrap materials.

17. It is clear that so far as the present proceedings are concerned, they are not in the nature of por bono publico. The appellant herein had made representation to the Hon'ble Chief Justice of High Court of Judicature at Bombay earlier which was treated as Writ Petition (PIL) and the petition was disposed of by the Court granting liberty to the aggrieved parties to approach appropriate forum in appropriate proceeding without granting any relief. Prima facie, therefore, in our 2 opinion, the contention of the contesting respondents is well-founded that if the appellant herein was aggrieved by certain orders passed by Debt Recovery Tribunal (DRT)- I, Mumbai, he ought to have approached Debt Recovery Appellate Tribunal (DRAT) by filing appeals against those orders. If he had grievance against the Company or inaction on the part of the Authorities under Labour Laws on the ground that they had not protected the interests of workers of Laxmi Vishnu Textile Mills, he ought to have approached Labour Forum. The appellant, however, did neither. As soon as the PIL Writ Petition was disposed of, within few days, he filed another writ petition in his individual capacity. The High Court, in our opinion, therefore, was right in dismissing it in limine by passing the impugned order that it was not a fit case to exercise extraordinary jurisdiction under Article 226 of the Constitution.

(iii) any Qualified or Primary Union in respect of such industry authorised in the prescribed manner in that behalf by the employees concerned;

55. If, at this stage, we set aside sale in favour of respondent No.7, serious prejudice will be caused not only to respondent No.1 and respondent No.7--vendor and vendee, respectively, but also to others like banks, financial institutions, other creditors and also to workers for whose benefit and welfare 6 the appellant is fighting. It is pertinent to note that no secured or unsecured creditor has come forward making grievance that though he was entitled to more amount, he has not been paid such amount. So far as workers are concerned, we have already dealt with rights of Representative-Union in detail and have held that the Representative Union has preferential right to appear in the proceedings under the Act. Hence, taking any view of the matter, in our opinion, this is not a fit case to exercise discretionary and equitable jurisdiction under Article 136 of the Constitution. FINAL ORDER

56. For the forgoing reasons, in our opinion, the appeal has no substance. It deserves to be dismissed and is hereby dismissed. On the facts and in the circumstances of the case, however, there shall be no order as to costs.