# M/s Swadeshi Cotton Mills v. Asstt. Labour Commissioner and others

- **Citation:** High Court of Judicature at Allahabad #39049
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2000
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-swadeshi-cotton-mills-v-asstt-labour-commissioner-and-others-39049
- **Pages:** 4

## Text

1ALL] M/s Swadeshi Cotton Mills V. Asstt. Labour Commissioner and others 49
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By the Court

1. All the aforesaid matters were heard
together as a common point of law stood
involved in all these cases. The present order,
accordingly, would cover all the aforesaid
petitions.
2. The petitioners run an industry as a unit
of National Textile Corporation (in short, the
NTC) at Naini, Allahabad. It is the case of the
petitioner that the NTC is an undertaking of
the Government of India under the provisions
of the Industrial Development Regulation Act,
and
the
Swadeshi
Cotton
Mills
Co.
Ltd.(Acquisition and Transfer of Undertaking)
Act, 1986. The unit became sick and had
submitted a reference under Section 15(1) of
the
Sick
Industrial
Companies
(special
Provisions) Act, 1985 (in short, the BIFR). It
was the further case of the petitioners that the
reference was registered by BIFR by its order
dated 8.6.1993 and the petitioner company
had been declared sick under Section 3(1)(o)
of the SICA, 1985. It was urged on behalf of
the petitioners that being declared a sick unit,
no recovery proceedings were to be initiated
against the petitioner mill under section 22 of
the SICA, 1985.

3. There was, however, a claim for
payment
of
gratuity
to
certain
retired
employees of the petitioner and the Assistant
Labour Commissioner (Central), being the
controlling authority under the Payment of
Gratuity Act, 1972, proceeded against the
petitioners for recovery of the unpaid amount
of gratuity.

4. So for the first mentioned writ petition
is concerned, there had been a finding of the
Assistant
Labour
Commissioner
dated
11.6.1999 directing payment of Rs.65,652.30
together with interest as gratuity to respondent
no.3, J.P. Saha. The findings of respondent
no.1 were challenged in the writ petition not
only on the ground of Section 22 of the SICA,
1985 but also on merits of the claim that no
gratuity was to be paid to respondent no.3 as
he had not vacated the official quarters.

5. In the second mentioned writ petition,
the finding was dated 15.6.1999 for an
amount of Rs.44,128.80 with interest in
respect of one Gula Singh and similar
INDIAN LAW REPORTS ALLAHABAD SERIES [2000
50
objections as per the first mentioned case
were taken towards this finding as well .

6. In the third mentioned writ petition,
again, the finding was dated 15.6.1999 for a
sum of Rs.48,106.60 with interest in favour of
one Munendra Singh Bisth. Objections in this
case were also similar to those as the first
mentioned case.

7. In the last mentioned writ petition, the
finding was dated 15.6.1999 for a sum of
Rs.31,284/-plus interest for one Ali Haidar.
Here also similar objections, as stated above,
were raised.

8. In all the writ petitions, the petitioners
made a prayer for a writ of certiorari for
quashing the impugned orders dated 14.6.99
and 15.6.99 and for a writ in the nature of
mandamus directing the respondents from
implementing the aforesaid orders towards
recovery of the alleged dues. It was asserted
in all these writ petitions that in similar
circumstances a large number of writ petitions
had been filed before the Allahabad High
Court and in all those cases concerning
workmen had not been vacated official
quarters the High Court had recorded orders
staying the direction for payment of gratuity
unless the workers vacated the quarters. The
copies of the orders were annexed with the
writ petitions. On behalf of the petitioners it
was contended that Section 22 of the SICA,
1985, was a clear bar towards recovery of the
dues even for payment of gratuity. This point
was seriously contested by the learned
counsel for the Union of India who had
submitted that when it was a question of
payment of gratuity. The bar under Section 22
of the SICA , 1985, would not be applicable.

9. There is no denial that the employees
are entitled to gratuity under the Payment of
Gratuity Act, 1972. There is also no denial
that the Assistant Labour Commissioner was
the controlling authority for payment to an
employee
on
the
termination
of
his
employment after he has rendered continuous
service for not less than 5 years, and this
termination might be on his superannuating or
on his retirement or resignation or even on his
disablement due to accident or death. The Act,
however, does not define what was a gratuity,
but speaks that for every completed year of
service or part thereof in excess of 6 months,
an employer shall pay gratuity to an employee
at the rate of 15 days wages based on the rate
of wages last drawn by the employee
concerned. In the case of monthly rated
employees, the 15 days' wages shall be
calculated by dividing the monthly rate of
wages last drawn by him by 26 and the
quotient shall be multiplied 15. This amount
of gratuity is not to exceed Rs.1,00,000/- as
per this Act. Although gratuity has not been
defined, the scheme discloses that it is related
to the period of service and to the rate of
wages of an employee.

10. The SICA 1985, was made in public
interest with a view to secure the timely
detection of sick and potentially sick company
owning industrial undertakings, the speedy
determination by a Board and experts of the
preventive, ameliorative, remedial and other
measures which need to be taken with respect
to such companies and the expeditious
enforcement of the measures was determined
and for matters connected therewith or
incidental thereto. Section 22(1) of this Act
reads as follows:

"22. Suspension of legal proceedings,
contracts, etc.-(1). Where in respect of an
industrial company, an enquiry 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 in the
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
1ALL] M/s Swadeshi Cotton Mills V. Asstt. Labour Commissioner and others 51
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 advanced granted to
the industrial company or of any guarantee in
respect of any loans or advanced 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.

(2) .................."

11. It appears that this section applies
when an enquiry under Section 16 is pending
or a scheme referred to under section 16 is
under preparation or consideration of a
sanctioned scheme is under implementation
and also when an appeal under Section 25
relating to an industrial company is pending.
If these conditions are fulfilled, then no
proceeding for winding up the industrial
company or for execution or distress against
any of the properties of the industrial
company and not even a suit for recovery of
money shall lie or be proceeded further except
with the consent of the Board for the appellate
authority.

12. Only in reference to this provision, the
learned counsel for the petitioner submitted
that the findings in question had imposed
monetary liability on the petitioners and
when the petitioners are covered by the SICA
1985, no recovery in terms of the findings
could be made by execution or distress
without the consent of the Board or the
appellate authority.

13. In this connection, learned counsel for
the respondents submitted that this bar was
not applicable in cases of payment of gratuity.
Learned counsel for the Union of India relied
on a decision of the Bombay High Court in
support of her contention. The judgement was
delivered in relation to a case between the
NTC
(South
Maharashtra)
and
B.N.
Jalgaonkar, as reported in 1999 (81) Factories
and Labour Reports at 234. It was a case of
recovery of wages and a question came up for
consideration whether the recovery of the
wages due to workmen was also barred by the
provisions of Section 22 of the SICA, 1985.
The Hon'ble single Judge of the Bombay
High Court had before him the decisions of
the Apex Court in the case of Sri Chamundi
Mopeds, AIR 1992 SC 1439,and Dy.
Commercial Tax Officer Vs. Coramandal
Pharmaceuticals and others reported in JT
1997 (3) SC 660, and also some other
decisions. The question was that if at all
Section 22 of the SICA, 1985 was thought
applicable to bar recovery of wages of
workmen the workmen would have to
approach the BIFR and if such a position was
allowed to prevail that would defeat the
legitimate claim of the workmen for wages
and other dues by not payment in the first
instance and also forcing them to resort to
other remedies. The contention of the NTC
was dismissed by the learned single Judge.

14. The petitioner relied on a decision of
the Supreme Court as reported in AIR 1990
SC 1017 . In this case the proceedings were
taken up for recovery of property tax under
Section 129 of the Bombay Village Panchayat
Act from M/s. Shri Vallabh Glass Works Ltd.
Which was a sic industry under the provisions
of the SICA, 1985, and proceedings under
Sections 16 and 17 of the Act were pending .
It was held that the proceedings for recovery
of property tax could not lie in view of
Section 22 of the Act except with the consent
of the Board established under the law.

15. Reliance was also placed by the
respondent on a decision of the Allahabad
High Court in the case of Poisha Industries
Vs. Collector of Ghaziabad, as reported in
1998 (79) FLR 166. A recovery proceeding
was initiated against an industry covered by
INDIAN LAW REPORTS ALLAHABAD SERIES [2000
52
the SICA, 1985 and the claim related to wages
payable to the workmen. The relationship of
master and servant between the industrial
company and the workman was continuing,
the court held that the employer was bound to
pay wages even though no work was not
taken from them and proceedings for recovery
of such wages were not covered by Section 22
of the SICA, 1985.

16. As observed above, the SICA, 1985, is
a legislation made in public interest for
securing timely detection of sick companies
owning industrial undertakings and it was
thus a legislation for the benefit of the
industries in public interest. The public
interest cannot be looked bereft of the
interests of the workmen. The policy behind
the labour legislation's is aimed at security
justice to the workmen and to avoid
exploitation by employers, either by nonpayment
of
wages
or
by
wrongful
retrenchment or by withholding payment of
wages or the like. Thus, a protection of the
interest of an industrial company may not be
given an upper hand to the protection of the
labourers working therein and, as observed by
the Bombay High Court in the case of NTC
Vs. B.L. Jalgaonkar (supra), Section 22 of the
SICA, 1985, must not be allowed to defeat
the legitimate claim of the workmen for
wages. In fact, this decision was based on the
finding of the Apex Court in the case of Dy.
Commercial Tax Officer (supra) wherein it
had been held that recovery of commercial tax
could not be barred under Section 22 of the
SICA, 1985. Gratuity, as observed above, is
related not only to the period of employment
but also to wages and the payment of gratuity
is one of the beneficial measures introduced
by labour legislation. To extend the provisions
of Section 22 of the SICA, 1985 to prohibit
recovery of gratuity, which is related to
wages, would be a negation of a legally
accepted right of the workmen. Section 22
must be interpreted not to cover a bar of
recovery of payment of wages or gratuity to
workmen. Seen in this light, the objection of
the
petitioners
against
the
impugned
recoveries is not tenable.

17. If at all the workmen are holding over
possession of the official quarters, there must
be some provision in the regulations of the
employers to charge a penal rent from the
occupiers and mere non-vacation may not be a
ground for withholding the payment gratuity.

All the writ petitions are, therefore,
dismissed.
Petition Dismissed.

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By the Court

By filing this writ petition on 3rd July,
1989, the petitioners, who are organised