Case: Textile Labour Assocn.  Vs. Official Liquidator

2. In I.A. No.of 1997 filed by the Official Liquidator appointed in respect of Ambica Mills Ltd. in Civil Appeal No.of 1983, this Court on 17.10.1997 held asthat is necessary to be said is that out of the assets of the company under liquidation, the dues of ONGC Ltd., are required to be paid off first and the question of making any payment to any other creditor can arise only out of the surplus, if any, remaining after the full dues of the ONGC Ltd. have been paid off. The High Court is, therefore, to proceed with the matter in this manner. I.As stand disposed of.The petitioners in these review petitions contend that an application had been made before the High Court of Gujarat in Company Application No. 143 of 1997 in Company Petition No. 121 in which the High Court directed that the Official Liquidator should make an application before this Court after impleading the company concerned; that pursuant thereto, he filed an application No.seeking for permission to sell the immovable properties of the Company and to disburse the sale proceeds in accordance with law; that to this application none of the Unions of the workmen or other workmen were impleaded as respondents nor did the Official Liquidator in course of his application raised any pleading regarding the priority of disbursement of sale proceeds or application of Sections 529 and529A of the CompaniesAct; that Petitioner No. 1 before us is a labour Association representing the workmen of Shri Ambica Mills Ltd. and petitioner No. 2 is labour Union representing the workmen of Ambica Tubes, a division of Shri Ambica Mills Ltd.; that the workmen of these two establishments have not received wages and employment benefits amounting to more than Rs. 40 crores by their employer Shri Ambica Mills; that on 15.4.1987 this Court had directed ONGC to supply gas to its consumers subject to the undertaking that they would not charge, encumber or alienate any of their immovable assets without the leave of this Court; that Company Petition No. 66 of 1988 was filed for winding up of Shri Ambica Mills Ltd.; that, however, during the pendency of this petition, a reference under the Sick Industrial Companies (Special Provisions) Act, 1985 was filed before the Board for Industrial and Financial Reconstruction (BIFR for short); that BIFR forwarded its opinion to this Court under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 to the effect that it was just and equitable that the company should be wound up; that the opinion of BIFR was registered as Company Petition No. 121 of 1995 and winding up order came to be passed on 17.1.1997 on Company Petition No. 66 of 1998 with Petition No. 121 of 1995 and others. The petitioners made claim of the outstanding dues of the workmen of Shri Ambica Mills and the Official Liquidator in this regard communicated to the petitioners that he does not have any funds at his disposal and even if the amounts are realised out of sale of the assets he would not be in a position to make any payment to anybody including the workmen, except ONGC in view of the order made by this Court in I.A. No.in C.A. No.of 1983. Similar letter was also sent to Vatva Industries Mazdoor Sabha on 12.8.1989. The Textile Labour Association received that letter on 6.9.1999. It is only on coming to know from the Official Liquidator that the workmen who are members of the petitioners association would not be able to get their dues, they sought for intervention in the matter.

Court's reasoning:
7. It is next contended that inasmuch as mandamus had been issued by this Court as to priority of claims in the matter of payment that mandamus will prevail over any law. This Court examined the plenary powers of this Court arising under Article 142 of the Constitution of India in Supreme Court Bar Association vs. Union of India & Anr., 1998 (4) SCC 409  and held that this Court in exercise of its power under Article 142 cannot ignore any substantive statutory provision dealing with the subject and it is only a residury power, supplementary and complementary to the powers specifically conferred on this Court by statutes exercisable to do complete justice between the parties wherever it is just and equitable to do so. It is intended to prevent any obstruction to the stream of justice. Though the order of this Court in respect of which review is sought for may be read as having been made pursuant to exercise of powers under Article 142 of the Constitution, still the same will have to be read in the light of the decision of this Court Supreme Court Bar Association vs. Union of India & Anr. (supra).8. The effect of Sections 529 and 529A is that the workmen of the company become secured creditors by operation of law to the extent of the workmens dues provided there exists secured creditor by contract. If there is no secured creditor then the workmen of the company become unsecured preferential creditors under Section 529A to the extent of the workmen dues. The purpose of Section 529A is to ensure that the workmen should not be deprived of their legitimate claims in the event of the liquidation of the company and the assets of the company would remain charged for the payment of the workers dues and such charge will be pari passu with the charge of the secured creditors. There is no other statutory provision overriding the claim of the secured creditors except Section 529A. This Section overrides preferential claims under Section 530 also. Under Section 529A the dues of the workers and debts due to the secured creditors are to be treated pari passu and have to be treated as prior to all other dues.9. Therefore, the law is clear on the matter as held in UCO Banks case that Section 529A will override all other claims of other creditors even where a decree has been passed by a court.10. Therefore, claims, if any, of ONGC will have to be worked out in accordance with Sections 529 and529A of the CompaniesAct as well. The contention advanced on behalf of ONGC by Shri Raju Ramachandran that if a mandamus had been issued, it will prevail over any law is not tenable and is rejected.