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

3. The Company was wound up by the final order of winding up which was passed by this Court on 05/09/2005. Provisional Liquidator, however, was appointed with full powers including the power to sell the Companys assets on 13/02/2002. The workers filed claim before the Official Liquidator claiming their dues from the date of winding up.4. The CompanySvadeshi Mills Ltd contended that the workmen were entitled to get their dues but not from the date of cessation i.e. from 01/08/2000 when they accepted their provident fund dues but from the date of appointment of Provisional Liquidator i.e. 13/02/2002. The Official Liquidator held that the workers were entitled to get their dues from 13/02/2002 when the Provisional Liquidator was appointed. Being aggrieved by the said order, the workers preferred a Petition before the Company Court.5. The learned Single Judge relying on the provisions of section 445(iii) held that the workers were entitled to get their dues from the date of official winding up of the Company. The AppellantGrandview Estate Private Ltd is a secured creditor of the Company and it has challenged this order on the ground that if the order of the learned Single Judge is implemented, it would get less money towards its dues since substantial portion would have to be paid to the workers if their dues are calculated from 05/09/2005 and not from 13/02/2002. The other AppellantCompany Ltd also has challenged the same order on similar grounds.6. Brief facts which are relevant for the purpose of deciding the above appeals are asSvadeshi Mills Company Limited (the Company) was engaged in the business of manufacturing textiles for a very long time. The financial condition of the Company deteriorated and became bad to worse on account of various reasons.8. The AppellantGrandview Estates Private Ltd is a major shareholder and also a secured and an unsecured creditor of the Company. The Appellant (hereinafter referred to as Grandview Estates Private Limited) owns 22,83,210 equity shares of the Company constituting 29.29% of the total equity shareholding in the Company. Respondent No.7ny is a promoter shareholder, a secured and unsecured creditor of the company and is carrying on business of engineering goods, shipping and office automation. Respondent No.7, alongwith its wholly owned subsidiary Company, owns 17,64,430 equity shares of the Company constituting 22.70% of the total equity shareholding of the Company. Thus, Grandview Estates Private Limited and ForbesCompany Limited are holding, in aggregate, about 52% of the total equity shares of the Company and they are the only secured creditors of the Company and they are part of the Shapoorji Pallonji Group.9. A winding up Petition was filed by the Ralli Brothers and Coney in 1997. Thereafter, various other winding up Petitions were also filed in the Bombay High Court and the Company made a reference to BIFR on 24/02/1998. On 24/04/1998, BIFR declared the Company as a sick Company. In October 2000, the Company stopped payment of wages to workers at Mill and Head Office. The BIFR on 05/02/2001 made a recommendation to the Bombay High Court for winding up of the Company. On 14/05/2001, AAIFR dismissed the appeal preferred against the Order of BIFR.10. On 28/09/2001, Government of Maharashtra passed a Resolution and appointed High Power Committee (HPC) to look into the workers dues and also dues of Bankers and Financial Institutions. The said Committee was empowered by this Court to dispose of the assets of the Company. HPC, on 08/10/2001, fixed 30/09/2001 as a cut off date for all dues. On 13/02/2002, in winding up proceedings, Official Liquidator was appointed as Provisional Liquidator of the Company with all powers including the power to sell assets of the Company. On 21/06/2002, the Company Court passed an order permitting the HPC to dispose of the movable assets of the Company, and deposit proceeds with the Official Liquidator.11. The Official Liquidator took possession of the factory and office premises in July 2002 and on 17/09/2003, sale of movable assets was confirmed by the Company Court. Thereafter, on 18/10/2003, the Official Liquidator issued an advertisement inviting claims from creditors including the claims of workers. The workers filed their claim through their Union on 30/12/2003. In 2004, HPC sold the movable assets and realized an amount of Rs 15.53 crores.12. This amount was disbursed by the Official Liquidator for reimbursement of the cost of security agencies, other related expenses, part payment of the dues of the workers and employees and statutory dues and dues of secured creditors. Employees of the Mill were paid from the proceeds from the sale of movable assets 75% only of the claim for unpaid earned wages upto September, 2001. Employees of Head Office were paid 75% plus gratuity calculated upto September, 2001 i.e. the date on which the Mill and the Head Office were closed by the Company. Finally, winding up order was passed in Company Petition No.1068 of 1997 and other Company Petitions on 05/09/2005. On 25/08/2006, the learned Company Court Judge revoked the order of appointment of HPC and consequently immovable property was not sold by the HPC. On 24/01/2011, Memorandum of Understanding was signed by the Company and the Union in respect of the Head Office Employees.13. As pointed out earlier, 52% of the equity shares of the Company are held by Grandview Estates Private Limited and ForbesCompany Limited. On 01/12/2006, full debt of IDBI was assigned to Grandview Estates Private Limited. Thereafter, on 31/08/2007 full debt of Bank of Baroda was assigned to Grand View Estates Private Limited. Similarly, 70 out of 146 unsecured creditors debts were assigned to Grandview Estates Private Limited.14. AppellantGrandview Estates Private Limited also filed a Petition in this Court for setting aside the order of winding up and deposited about Rs 86 crores for that purpose in this Court. However, the High Court did not accept the said proposal and the amount was refunded to Grandview Estates Private Limited who then have filed an SLP in the Supreme Court, which is pending.15. The Official Liquidator thereafter started adjudication process inter alia of fixing of dues of the workmen. The Official Liquidator held that the workers were entitled to get their dues from the date of appointment of the Provisional Liquidator of the Company. The workersRespondent Nos. 1 to 5 challenged the said order by filing Judges Summons No.487 of 2012. The learned Single Judge set aside the order of the Official Liquidator and directed that dues of the workmen should be paid from the date of order of winding up i.e. 05/09/2005 and not from 13/02/2002 which is the date on which the order appointing the Provisional Liquidator was passed.16. AppellantGrandview Estates Private Limited and ForbesCompany Limited have challenged this order by filing this appeal.

Court's reasoning:
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.