Judgment:
Ravi, R. Tripathi, J.
1. Rule. Mr. A.K. Clerk, learned advocate for the respondent, waives service of rule.
1.1 With the consent of the parties, the matter is taken up for final hearing today.
2. The present petition is filed by I.S.P.L. Industries Limited, challenging the order dated 14 June, 2001, passed by the Labour Court, Rajkot, allowing the Recovery Application Nos. 251/2000 to 425/2000, 428/2000 and 430/2000 to 433/2000.
3. Mr. A.K. Clerk, learned advocate appearing for the respondent, raised preliminary objection that single petition is not maintainable challenging the order passed inthe aforesaid recovery applications. Mr. K.S. Nanavati, learned advocate appearingfor the petitioner, undertakes to file other 179 petitions in the respective recovery applications.
4. The case of the present petitioner is that the petitioner-company, which is engaged in the business of manufacturing parts used by the automobile and steel industries, for last so many years, sustained huge losses for the financial year ended on 31 March, 2000. The petitioner-company after its all genuine efforts failed to avoid the aforesaid situation. As the net worth of the petitioner-company eroded by the losses at the end of the aforesaid financial year, the petitioner-company filed reference vide its letter dated 21 August, 2000, with the BIFR under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the 'SICA' for brevity). It is the case of the petitioner-company that the said reference came to be registered as case No. 275/2000 by the Registrar of the BIFR and the samewas intimated to the petitioner-company by a letter dated 7 September, 2000, a copy of which is produced at Annexure-B to this petition.
5. Mr. K.S. Nanavati, learned advocate appearing for the petitioner, tendered a draft amendment whereby the Manager, ISPL Industries Limited, Bhavnagar Road, Aji Industrial Estate, Rajkot-2, is sought to be added as petitioner No. 2 while the Additional Collector, Collector Office Compound, Rajkot City, is sought to be added as respondent No. 2 and paragraph 7(a) is sought to be added in the petition along with a copy of the notice dated 26 June, 2001, as Annexure-E and a copy of the attachment notice dated 12 July, 2001, as Annexure-F. By the said amendment, prayer clause is also sought to be amended by adding Clause C-1 as the prayer clause.
6. The case of the petitioner-company is that, as the petitioner-company is before the BIFR, the recovery applications referred to could not have been filed and proceeded with and, therefore, the judgment and order [of the court] below [on] the recovery applications, a copy of which is produced at Annexure-A, is required to be quashed and set aside by this court. In the alternative, Mr. Nanavati submitted that, in any case, the coercive process for recovery of the amount awarded by the order below the recovery application be quashed and set aside in view of the fact that the petitioner-company is before the BIFR.
7. Mr. Nanavati, learned advocate appearing for the petitioner, invited the attention of the court to the scheme of the Act. He submitted that Section 15 [of SICA] provides for reference to the Board, Section 16 provides for inquiry into the working of sick industrial companies, Section 17 provides for powers of the Board to make suitable order on completion of the inquiry, Section 8 contains the provisions for preparation and sanction of scheme. He specifically referred to Section 22, which provides for suspension of legal proceedings contracts, etc. For ready perusal, Sub-sections (1), (2) and (3) of Section 22 are reproduced hereunder ;
'22. Suspension of legal proceedings, contracts, etc. --(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained inthe Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with consent of the Board or, as the case may be, the Appellate Authority.
(2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned under Section 18 notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law orin the memorandum and articles or association of such company or any instrument having effect under the said Act or other law -
(a) it shall not be lawful for the shareholders of such company or any otherperson to nominate or appoint any person to be a director of the company;
(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board.
(3) Where an inquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or during the period of consideration of any scheme under Section 18 or where any such scheme is sanctioned thereunder, fordue implementation of the scheme, the Board may, by order declare with respectto the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing order or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately beforethe date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptationsand in such manner as may be specified by the Board : Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time, so, however, that the total period shall not exceed seven years in the aggregate....'
7.1 Mr. Nanavati submitted that Sub-section (1) of Section 22 has a non obstante clause, the relevant part of the sub-section reads that, --
'Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law.'
He submitted that the legislature was very clear to give sweeping effect to the provisions of Sub-section (1) of Section 22 and that is why the said sub-section is enacted with non obstante clause. He further submitted that the intention of the legislature can also be gathered from the words, --
'No proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.'
Mr. Nanavati submitted that the words here, 'no suit for the recovery of money', are to be given a broader meaning. According to him, these words will take in their compass the present recovery applications also.
8. In this regard, Mr. Nanavati relied upon a judgment of the Punjab & Haryana High Court, in the matter between Premnath L. Ganesh Dass v. Premnath L. Ram NathAIR 1963 Punj 62. The High Court, in the said case, while considering the meaning of the words, 'suit', observed that, --
'The word 'suit' appearing in Section 21 of the Arbitration Act cannot be construed in this broad generic sense and does not include execution proceedings. The section restricts the reference to arbitration in a matter in difference betweenthe parties arising in suit and precludes such reference to arbitration in executionproceedings.'
8.1 The court observed in paragraph 3 as under :
'Broadly, a suit is a proceeding in a court of justice for the enforcement of aright denotes a legal proceeding of a civil kind. It is a proceeding in a court according to the forms of law to enforce the remedy to which a party deems itselfentitled. The term 'suit' in its comprehensive sense may be treated as applying toany original proceeding in a court of justice by which a party pursues the remedywhich the law grants him. The modes of proceedings may be various dependingupon the different stages in the litigation, that is, proceedings in the originalcourt, court of appeal, proceedings in the nature of review or revision and execution proceedings. The term has also a much narrower meaning when it is explained in the procedural sense. Every judicial proceeding cannot be termed asuit.'
8.2 Mr. Nanavati submitted that in the present case also, when the section contains the words, 'and no suit for the recovery of the money', it must mean that boththe proceedings, that is, proceedings under Section 33(c) of the Industrial DisputesAct and also the recovery proceedings are covered within the ambit of these words.He further submitted that his interpretation on the word 'suit' be accepted, more particularly, when these [proceedings] are sought to be resorted to in the present caseand pursuant to which the two notices are given by the Collector on 26 June, 2001,and 12 July, 2001.
9. Mr. Nanavati also relied upon a judgment of Madras High Court in the matter between Chotilal Sowcar v. R. Jawantraj Sowcar AIR 1966 Mad 322 (v 53 c 90). The Madras High Court, while considering the meaning of word 'suit' observed in paragraph 5 that, --
'In construing a beneficial enactment like the Usurious Loans Act, 1918, the perspective of approach certainly be generous ; a narrow or very literal perspective will not be in consonance with the Preamble of the Act or the principles of construction of beneficial statutes of this type, having in mind, the probable intention of the legislature.'
9.1 Mr. Nanavati submitted that, in the present case also, SICA is the Act which is with a definite object in mind and the object is that 'there has to be an attempt for revival of the unit, which is reported to be sick', and that is what is provided in the scheme of the Act. He submitted that the provisions of Section 18 regarding preparation and sanction of schemes and provisions of Section 19 which provide for rehabilitation by giving financial assistance, will be rendered nugatory if the property of the sick industry is allowed to be withered away by permitting the recovery proceedingsto go on and not treating them to be included in the meaning of the word 'suit', which is employed in Sub-section (1) of Section 22. Mr. Nanavati submitted that intention of the legislature is to be gathered by applying well-known principles of interpretation which require to keep the object of the Act in mind.
10. Mr. Nanavati very fairly submitted that there is no direct judgment on the subject matter of this petition in his favour. He submitted that the judgments which are referred to by the learned Judge of the Labour Court in paragraph 4 of the order are only to the effect that provisions of Section 22(1) cannot be applied to the 'matter of payment of wages of the workmen'. He further submitted that his alternative submission is that, assuming for the sake of arguments that Section 22(1) cannot be applied to the matter of payment of wages of the workmen, it can certainly be applied in the matter of execution of the orders passed in recovery applications, which are having a direct impact on the properties of the company as the orders passed by the Labour Court, Rajkot, are sought to be enforced against the properties of the company through coercive process of recovery, as arrears of land revenue. Mr. Nanavati submitted that the notice for attachment is already issued, which is produced at Annexure-F, and once the property of the company is under attachment, object of the Act will never be achieved and the same will be frustrated. Mr. Nanavati submitted that interpretation cannot be on the provisions of Section 22 in such a manner which will result into frustration of the object of the Act.
11. Mr. Nanavati placed reliance on an unreported decision of this court in Special Civil Application No. 7756 of 1994 (Coram : H.L. Gokhale, J.) dated 30 September, 1994. The court observed in paragraph 4 as under :
'In that view of the matter, since the present petitioner seeks to recover money from the undertaking in respect of which a scheme referred to in Section 17 is under consideration, the present petition cannot be proceeded further except with the consent of the Board or the Appellate Authority.'
11.1 The learned Judge placed reliance on a judgment of the apex court in the matter between Maharashtra Tubes Ltd. v. State Industrial and Investment Corporation of Maharashtra (1994) 2 Comp LJ 346 (SC) ; (1993) 2 SCC 144, wherein according to the learned Judge, the apex court had held that the word 'proceedings' under Section 22(1) has to be broadly construed and that while speaking about the phrase 'the like', the apex court has again stated that the legislature has advisedly used an omnibus expression 'the like' as it could not have conceived of all possible coercive measuresthat may be taken against a sick undertaking.
11.2 The learned Single Judge turned down the submission of Mr. Sinha, learnedadvocate appearing for the petitioner, that the proceedings for recovery of wages, astaken up by the workman concerned, will be covered only under Section 22(3) of thesaid Act, and not under Section 22(1) thereof. The learned Judge rejected the said contention by saying that, --
'In my understanding, the submission cannot be accepted for the simple reason that the provision under Section 22(1) and 22(3) will have to be read together. They are parts of the same section. The provision of Section 22(1) has alreadycome to be interpreted in the case quoted above, wherein the expression 'proceedings' has been directed to be construed broadly.'
12. Mr. Nanavati also placed reliance on the order dated 3 November, 1999, passed by this court in Special Civil Application No. 4237 of 1998 (Coram : Miss Justice R.M. Doshit). The learned Judge relied upon the judgment of this court in the matter between SLM Maneklal Industries Limited v. Regional Provident Fund Commissioner (1997) 1 GLR 224 and also on the interim orders made in Letters Patent Appeal No. 195 of 1995 in Special Civil Application No. 10039 of 1995 which refused granting of benefit of Section 17-B of the [Industrial Disputes] Act pending the petition.
13. Mr. A.K. Clerk, learned advocate appearing for the respondent, submitted that an application filed by the workman, being Recovery Application No. 425 or 2000, is produced at Annexure C, page 53 of the petition, wherein it is stated that on the basis of the schedule annexed to appellation [application ?], the amounts mentioned therein are payable by the petitioner-company and that the same should be recovered by way of arrears of land revenue and be paid to the workmen. The schedule annexed to the application reads that between the petitioner-company and Saurashtra Majoor Mahajan Sangh, under the provisions of Section 2(p) and Section 18(1) of the Industrial Disputes Act, 1947, and the rules framed thereunder, on 30 May, 1994, a settlement was arrived at regarding wages, dearness allowance, productivity allowance, house rent allowance, education allowance and other benefits regarding bonus, leave, uniform, tea, etc. It is also stated in the same schedule that up to August, 2000, benefits were paid in accordance with the aforesaid settlement arrived at between the petitioner-company and Saurasthtra Majoor Mahajan Sangh, but, for the month of September, October and November, 2000, the amounts mentioned therein are not paid and that the same should be recovered as arrears of land revenue through the District Collector by issuing a recovery certificate.
14. Mr. Clerk further submitted that the petitioner company has filed its reply to the said recovery application, a copy of which is produced at page 57, and in that reply, the liability of making the said payment is not disputed. It is also not disputed that the workmen have worked during the period for which the wages and the benefits under the aforesaid settlement are claimed for. Mr. Clerk pointed out that what is stated in the reply is only that the petitioner company has sustained huge cash losses for the financial year ended on 31 March, 2001, due to recession in the steel and automobile industry ; that these losses eroded the net worth of the company ; that the company has filed its reference vide its letter dated 21.8.2000 with the Hon'ble BIFR under Section 15(1) of the SICA ; and that since the company is registered as a sick industry with the BIFR, no suit for recovery of dues can be proceeded with without the consent of the Hon'ble BIFR. Mr. Clerk submitted that in the reply filed by the petitioner-company, there is not a word about the liability being not accrued on account of the wages and other benefits payable to the workmen on the ground that they have not worked. Mr. Clerk also submitted that even in the written submissions, the petitioner-company has not said that the liability has not accrued as the workmen have not worked and, therefore, they are not entitled for the wages and the benefitsunder the settlement. A copy of the written submissions are produced at Annexure-D, page 60.
15. Mr. Clerk then invited the attention of the court to paragraph 4 of the order of the learned Judge of the Labour Court wherein it is recorded that the petitioner-company did not produce the letter referred to in its reply, The petitioner-company has referred to the letter dated 7 September; 2000, The petitioner-company felt contented only by producing a letter dated 21 August, 2000. The learned Judge of the Labour Court has also recorded that the petitioner-company has not produced any order of BIFR though it is stated that such papers are accompanied with the reply of the petitioner-company. The learned Judge has recorded in terms that the petitioner-company though having such documents in its possession, and it is the moral duty of the petitioner-company, to, produce, such documents before the Labour Court, the same are not produced. In view of the same, the learned Judge has recorded that on the basis of the record and evidence led before the court, the defence of the petitioner-company, cannot be accepted. Mr. Clerk submitted that, in these circumstances, the petitioner-company cannot be heard, saying that as the petitioner-company is registered as a sick industry before the BIFR, the petition be entertained and reliefs as prayed for be granted. Mr. Clerk also submitted that the fact regarding the non-working of the company in December, 2000, is of no consequence, inasmuch as the amount claimed is towards the wages for the period of September, October and November, 2000, when the company, was working, workmen have worked and that they are entitled for the benefits under the settlement which is still in operation. Not only, that, the company itself has entered into a fresh agreement on 5 November, 2000, before the Assistant Labour, Commissioner, Rajkot, and Government Labour Officer, Rajkot. A copy of minutes of meeting is produced at Annexure-I to the affidavit in reply filed by the respondent. It is specifically recorded in the said minutes that today, at the end of the discussion, the institution has agreed to pay all workmen the wages, due by a particular date, which are detailed hereunder :
(i)Wages for August, 2000. 15.11.2000(ii) Wages for September, 2000 30.11.2000(iii) Wages for October, 2000 31.12.2000
15.1 It is further recorded in the minutes that though the wages for each month are to be paid by the institution before a specified date under the Payment of Wages Act, 1948, looking to the financial condition of the institution and taking into consideration the aspect of industrial peace, the union has agreed for the aforesaid debts for the payment of wages. It is also recorded that the bonus for the year 1998-99 and 1999-2000 will also be paid at the earliest, as agreed by the unit.
16. Mr. Clerk, learned advocate appearing for the respondent, submitted that the scheme of the SICA is very clear and wording employed in Sub-section (1) of Section 22 does not include wages part even remotely. Mr. Clerk submitted that the reason is explicitly clear. The labour is the only factor which has the question of survival, and therefore, the legislature in its wisdom has not incorporated the 'wages' in the list ofitems which can be suspended under Sub-section (1) of Section 22. Mr. Clerk submitted that to give effect to this goal, Sub-section (3) of Section 22, provides that, --
'The Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property,agreements, settlements, awards, standing orders of other instruments in force, tois which such sick industrial company is a party or which may be applicable to suchA sick industrial company immediately before the date of such order, shall remainsuspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said debt, shall remain suspended or shallbe enforceable with such adaptations and in such manner as may be specified bythe Board.'
16.1 Mr. Clerk submitted that from the reading of the aforesaid provisions of Subsection (3) of Section 22, it is clear that the legislature has given a discretion to theBIFR by using the word, 'may', It is only when a sick industrial company makes out a case, the Board has to consider to exercise its discretion and make a declaration. Mr.Clerk further submitted that, in the proviso, care is taken about the 'period'. Initially, such a declaration is to be made for a period not exceeding 2 years. Thereafter, it canbe extended by one year at a time, for a total period not exceeding 7 years. Mr. Clerk submitted that, in view of the same, the petitioner-company could have approached the BIFR for such a declaration. He submitted that, in the present case, even that course is not open to the petitioner-company in view of the fact that on 5 November,2000, the petitioner-company has entered into a fresh agreement. Mr. Clerk submitted that a notice was given by the Collector's office on 26 June, 2001, stating that ifwithin 10 days from the receipt of the notice, the amount mentioned therein is not paid, then, steps for attachment of the property will be taken. An attachment notice was issued on 12 July, 2001. It was open to the petitioner-company to approach the BIFR and apprise the Board about its liability arising under the earlier settlement dated 21 June, 1994, and also under the fresh agreement dated 5 November, 2000. Mr. Clerk also pointed out that the bona fides of the company are not clear inasmuch as, in the meeting of 5 November, 2000, the company did not even mention a word aboutits being registered as a sick industry before the BIFR. Not only that, while the matter was moved before the BIFR, the company did not inform the Board that it has an existing as well as recurring liability under the settlement dated 21 June, 1994. The company also failed to inform the Board about renewal of that liability by its own agreement dated 5 November, 2000. Mr. Clerk rightly submitted that under the provisions of Sub-section (3) of Section 22, there has to be a declaration by the Board on the Board being moved by the unit concerned. There is no automatic suspension of the settlement and the rights, privileges, obligations and liabilities accruing or arising thereunder. Mr. Clerk also submitted that, in the first instance, the company could have approached the Board for suspension of the settlement itself and, in any case, if that settlement was hot suspended, the company could have moved for suspending the rights, privileges, obligations and liabilities arising out of such settlement. Mr. Clerk submitted that having failed to discharge the obligations on its part, the petition to deprive the workmen of their legitimate rights is not worth entertaining bythis court, more particularly, when the petitioner-company is before this court under Articles 226 and 227 of the Constitution of India.
17. Mr. Clerk submitted that besides the judgments, which are recorded by the learned Judge of the Labour Court in paragraph 4 of this order, there are other judgments which are on the same line. A consistent view is taken by various High Courts that so far as the dues of wages payable to the workmen are concerned, the same are not affected by the provisions of the Section 22 of the SICA. Mr. Clerk relied upon a judgment of the Karnataka High Court reported in (1999) 1 LLJ 411. He also relied upon a judgment of this court in the matter between Parmeshwar Narayan v Collector, Ahmedabad and Anr. (2000) 1 GLR 521, wherein the learned Single Judge was pleased to hold that, --
'The application under Section 33C(2) of the Industrial Disputes Act for retrenchment compensation, there is no bar for the authorities under the Industrial Disputes Act to proceed notwithstanding the provisions under Section 22 of SICA.'
The learned Judge observed that the provisions of the Industrial Disputes Act cannot be controlled or [was] intended to have been curtailed by the incorporation of Section 22 of SICA. Mr. Clerk also pointed out that the said judgment of the learned Single Judge was challenged in appeal being Letters Patent Appeal No. 1238 of 1999, which came to be dismissed by the judgment and order dated 27 October, 1999.
18. Mr. Clerk also submitted that there is a consistent view of various High Courts on the point as is clear from the judgments which are referred to hereinabove. He submitted that from the judgments of the Bombay High Court, Karnataka High Court (Division Bench), Allahabad High Court and this court, that so far as the provisions of Section 22 are concerned, the same do not curtail or control the provisions of the Industrial Disputes Act.
19. Lastly, Mr. Clerk submitted that in the order passed by BIFR, which is produced at Annexure-D collectively, dated 22 May, 2001, the last clause of the operative part of the order is :
'The company shall not dispose of or alienate in any other way any of its fixed assets and current assets without specific prior approval of BIFR and the charge-holders under Section 22A of the Act. However, in case the unit was working, the current assets could be utilised for running day-to-day operations subject to keeping proper records therein and routing all transactions through the account with the company's financing bank(s) only.'
19.1 Mr. Clerk submitted that, admittedly, the wages and the benefits, which are claimed and granted by the Labour Court, are pertaining to September, October and November, 2000. These are the months when the unit was working and that being so, the BIFR has said that in case the unit was working, the current assets could be utilised for running day-to-day operations. Only one condition is placed to the effect that the same is subject to keeping proper records therein and routing all transactions through the account with the company's financing banks, Mr. Clerk submitted that in spite of this clear order from BIFR, filing of a petition before this court is nothingbut a mala fide attempt on the part of the petitioner-company to deprive the workmen of their legitimate dues. He submitted that the petition is, therefore, required to be dismissed with costs so as to see that the poor workmen are compensated for being dragged before this court.
20. The contentions of both the sides are taken into consideration and, on careful consideration, it is found that the submissions made by Mr. Nanavati are not acceptable and the same are not accepted. On the other hand, the submissions made by Mr. Clerk are found with substance and the same are accepted.
21. In the result, the petition fails and the order passed by the Labour Court in Recovery Application Nos. 251/2000 to 425/2000, 428/2000 and 430/2000 to 433/2000 is upheld. The petition is dismissed. Rule is discharged. No order as tocosts.
22. At this juncture, Mr. Nanavati, learned advocate appearing for the petitioner-company, requested for staying the notice dated 12 July, 2001, whereby the attachment is to take place on 23 July, 2001. As the petition itself is not entertained having no merits/substance, there is no question of granting any interim relief as prayed for. The request is rejected.