# RADHESHY AM AJITSARlA AND ANR v. BENGAL CHA TKAL MAZDOOR UNION AND ORS

- **Citation:** [2006] Supp. 2 S.C.R. 918
- **Court:** Supreme Court of India
- **Decided:** 2006-05-24
- **Case number:** Civil Appeal Nos. 4101-4103 of 2004
- **Bench:** Dr. Ar. Lakshmanan, R.V. Ra Veendran
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/radheshy-am-ajitsarla-and-anr-v-bengal-cha-tkal-mazdoor-union-and-ors-21294
- **Pages:** 36

## Headnote

Company Law:
Payment to unsecured creditors-In the course of winding up of a
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company/factory-Order for winding up of factory-Stayed subsequent to
proposal by a group of creditors (Managing group} of the factory to run the
factory by propounding a scheme-The managing group was also one of the
pre-scheme creditors-Scheme approved by Supreme Court-Direction of
Supreme Court to deposit a sum for disbursement of the same amongst
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unsecured creditors-Deposit of certain amount by subsequent managementThe deposited amount lymg with Registrar, High Court-The managing
group and another group of creditors were denied payment by the CourtHigh Court allowed payment to another group and to the managing group
to the extent of 25% and/or one fourth of their settled claim-In appeal filed
by the Labour union of the factory, High Court directed rea<{judication of
the claims-In appeal, held: the managing as well as another group of
unsecured creditors are entitled for payment as pre-scheme unsecured
creditors-Funds are meant for disbursement only to unsecured creditorsWorkers do not have a right to oppose the payment to unsecured creditorsThey do not have priority over creditors as the factory is not wound up and
is still a going concern-Companies Act, 1956-Section 529 A-Employees
State Insurance Act, 1948-Employees Provident Fund Act, 1952.
Companies Act, 1956-Section 529 A-Applicability of the provisionWinding up-stayed pursuant to a scheme for running the company-Claim
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of preferential right of workers over unsecured creditors under the provisionHeld: Protection under the provision is available only when the company
has been wound up---1t is not applicable when the compa1.y is a going
concern as a result of stay of winding up.
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Words and Phrases:
918
RADHESHY AM AJITSARIA v. BENGAL CHA TKAL MAZDOOR UNION
919
'In winding up'--Meaning of in the context of Sections 441 and 529A
A
of Companies Act, 19 5 6.
Respondent-factory was ordered to be wound up. Thereafter a
scheme was propounded to run the factory by 'N' group (the largest
group of creditors of the factory). The scheme provided for payments
to workers, electricity dues, statutory creditors and unsecured creditors.
'N' group was also included in the list of pre-scheme creditors. The
winding up was stayed. The scheme was approved by High Court as well
as by this Court. The scheme was finally passed by High Court with the
support of secured creditors as well as the workers. Thereafter some
unsecured creditors approached High Court complaining that they were
not paid. In view of the complaint, Company Judge cancelled the
scheme. In appeal against the cancellation of the scheme, rate of
payment was reduced from 2% to 1 % by the High Court. In Special
Leave Petition this Court by its Order dated 31.3.1994 directed 'N'
group to deposit a sum of Rs. 40 lacs by way of interim measure. The
Court also set aside the order of High Court reducing the rate of
payment from 2% to 1 % and further directed the Committee to deposit
Rs. 8 lacs per month. The amount of Rs. 40 lacs was transferred to High
Court for distribution of the same amongst the creditors. 'N' group was
replaced by another Committee of Management by Company Judge and
directed them to deposit Rs. 64 lacs and further directed payments to
substantial creditors except 'N' group. In appeal, Division Bench of High
Court allowed the new Committee to continue with the process of the
scheme, but set aside the direction for preferential payment to the
named unsecured creditors. Company Judge directed all pre-scheme
unsecured creditors to lodge their claims.
Registrar prepared the Report whereby name of 'N' group was
included while the name of 'A' group was excluded as persons entitled
to receive payments. Registrar, despite' A' group not being held as part
of 'N' group, did not make any payments to them. Company Judge by
order dated 9.9.1998 directed payment to all unsecured creditors except
'N' group on the ground that the group had made

## Text

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A
RADHESHY AM AJITSARlA AND ANR.
v.
BENGAL CHA TKAL MAZDOOR UNION AND ORS.
MAY 24, 2006
B
[DR. AR. LAKSHMANAN AND R.V. RA VEENDRAN, JJ.]
Company Law:
Payment to unsecured creditors-In the course of winding up of a
C
company/factory-Order for winding up of factory-Stayed subsequent to
proposal by a group of creditors (Managing group} of the factory to run the
factory by propounding a scheme-The managing group was also one of the
pre-scheme creditors-Scheme approved by Supreme Court-Direction of
Supreme Court to deposit a sum for disbursement of the same amongst
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unsecured creditors-Deposit of certain amount by subsequent managementThe deposited amount lymg with Registrar, High Court-The managing
group and another group of creditors were denied payment by the CourtHigh Court allowed payment to another group and to the managing group
to the extent of 25% and/or one fourth of their settled claim-In appeal filed
by the Labour union of the factory, High Court directed rea<{judication of
the claims-In appeal, held: the managing as well as another group of
unsecured creditors are entitled for payment as pre-scheme unsecured
creditors-Funds are meant for disbursement only to unsecured creditorsWorkers do not have a right to oppose the payment to unsecured creditorsThey do not have priority over creditors as the factory is not wound up and
is still a going concern-Companies Act, 1956-Section 529 A-Employees
State Insurance Act, 1948-Employees Provident Fund Act, 1952.
Companies Act, 1956-Section 529 A-Applicability of the provisionWinding up-stayed pursuant to a scheme for running the company-Claim
G
of preferential right of workers over unsecured creditors under the provisionHeld: Protection under the provision is available only when the company
has been wound up---1t is not applicable when the compa1.y is a going
concern as a result of stay of winding up.
H
Words and Phrases:
918
RADHESHY AM AJITSARIA v. BENGAL CHA TKAL MAZDOOR UNION
919
'In winding up'--Meaning of in the context of Sections 441 and 529A
A
of Companies Act, 19 5 6.
Respondent-factory was ordered to be wound up. Thereafter a
scheme was propounded to run the factory by 'N' group (the largest
group of creditors of the factory). The scheme provided for payments
to workers, electricity dues, statutory creditors and unsecured creditors.
'N' group was also included in the list of pre-scheme creditors. The
winding up was stayed. The scheme was approved by High Court as well
as by this Court. The scheme was finally passed by High Court with the
support of secured creditors as well as the workers. Thereafter some
unsecured creditors approached High Court complaining that they were
not paid. In view of the complaint, Company Judge cancelled the
scheme. In appeal against the cancellation of the scheme, rate of
payment was reduced from 2% to 1 % by the High Court. In Special
Leave Petition this Court by its Order dated 31.3.1994 directed 'N'
group to deposit a sum of Rs. 40 lacs by way of interim measure. The
Court also set aside the order of High Court reducing the rate of
payment from 2% to 1 % and further directed the Committee to deposit
Rs. 8 lacs per month. The amount of Rs. 40 lacs was transferred to High
Court for distribution of the same amongst the creditors. 'N' group was
replaced by another Committee of Management by Company Judge and
directed them to deposit Rs. 64 lacs and further directed payments to
substantial creditors except 'N' group. In appeal, Division Bench of High
Court allowed the new Committee to continue with the process of the
scheme, but set aside the direction for preferential payment to the
named unsecured creditors. Company Judge directed all pre-scheme
unsecured creditors to lodge their claims.
Registrar prepared the Report whereby name of 'N' group was
included while the name of 'A' group was excluded as persons entitled
to receive payments. Registrar, despite' A' group not being held as part
of 'N' group, did not make any payments to them. Company Judge by
order dated 9.9.1998 directed payment to all unsecured creditors except
'N' group on the ground that the group had made larger payments to
members of its group in comparison to other unsecured creditors.
Division Bench, in an appeal against order dated 9.9.1998 filed by 'J'
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by order dated 30.11.1998/1.12.1998 set aside the Registrar's report
insofar as the same exceeded the amount mentioned in the list of
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SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.
A
pre-scheme creditors. 'A' filed application for modification of order
dated 9.9.98 and the same was decided by order dated 8.3.2001 giving
directions to make payments to 'A' group holding that they were not
part of 'N' group. 'N' group's application for modification of the order
dated 9.9.1998 was disposed of by Single Judge holding that as all other
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nnsecnred creditors had been paid and even thereafter substantial funds
were left in the hands of the Registrar, hence payment of 25% and/or
one fourth of their settled claim after adjustment of payments already
made could be made to 'N' Group. Appeals were preferred by the
workers' union and respondent-factory under the new management of
'C'. High Court by impugned judgment directed readjudication of the
C claims. Hence the present appeals by 'A' group and two labour unions
and special leave petitions by 'N' group.
Disposing of the appeals and Special Leave Petitions, the Court
HELD I.I. That the Division Bench was not entitled to direct
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readj udication of the claims which were already adjudicated, contrary
to its own orders dated 30.11.1998/1.12.I 998. (952-GJ
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1.2. 'A' and 'N' groups are entitled for payment as pre-scheme
unsecured creditors in view of the specific directions given by this Court
on 31.3.1994. (952-FJ
1.3. The impugned judgment and order warrants interference by
th is Court under Article 136 of the Constitution of India as the
appellants have been wrongfully excluded from receiving the payments
though all other creditors similar to the status of the appellants have
received their payment long back thus there has been denial of justice.
[949-B-C)
1.4. The fund lying with the Registrar, original side, High Court
was specially earmarked for the pre-scheme unsecured creditors as
defined in the Scheme. (952-H)
1.5. This Court affirmed that the amount of Rs. 8 lacs per month
out of the revenues of the Company would be kept aside in the hands
of tht Registrar, Original side and pay to the unsecured creditors alone
{fl' 2% per month. Admittedly, the said corpus has been treated by
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successive orders of this Court and the High Court as being the dues
RADHESHY AM AJITSltltiA v. BENGAL CHA TKAL MAZDOOR UNION
921
of the unsecured creditors alone. None of these orders were ever
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appealed against or set aside. It is too late in the day to contend that
the said fund would also be utilized for payment of workers dues and
or other statutory dues for which the scheme made separate
arrangements. (950-A-C)
1.6. Division Bench of the High Court has erroneously concluded
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that 'N' Group were not part of the pre-scheme creditors and/or that
their names were not included in the list of pre-scheme creditors. The
DivisiOn Bench also erred in holding that the claims of the 'N' Group
had not been adjudicated which, was clearly contrary to the report of
the Registrar, which was accepted by both the Single Judge as well as
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by the Division Bench. (944-C-E]
1.7. The facts of the case clearly go to show and administer that
the workers do not have a right to oppose the payment to all unsecured
creditors out of the funds lying with the Registrar, Original Side, High
Court. (944-E-F]
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1.8. By order of this Court, the funds are meant for disbursement
only for unsecured creditors. Separate arrangements have been made
under the scheme for payment of other dues including workers dues.
The said scheme sanctioned in 1989 is still in operation and the present
Committee of Management is operating under the same scheme.
(944-F-G)
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1.9. The company being a running concern, the alleged dues of the
workers cannot be claimed against any specific member of the
management committee. The dues if any, are against the company and
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not against any individual members of the Committee of Management.
There is no question therefore of holding up payment due to the
unsecured creditors on the ground that workers dues are alleged to be
outstanding. (945-B-C]
1.10. The facts-that 'A' remained as a member of the Committee
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of management only for a brief period of 11 months, Appellant No.2
never participated in the management and affairs of the company, no
one including .the workers made any claim and/or grievance against the
appellants at any point of time; that 'A' group are unsecured creditors
. of the Company who were entitled to receive payment in terms of the
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SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.
A scheme at the rate of 2% per month and the entire payment in terms
of the said scheme without interest was to be disbursed to them within
a span of four years and two months and accordingly the entire amount
became due and payable in the year 1993 itself; and that at all material
times, there was no dispute with regard to the fact that Group of
B Company consisted of seven companies/firms which are 4istinct and
separate from the appellants has been duly noticed and recognized in
various court orders including the order of the Division Bench of the
High Court dated 30.11.1998/1.12.1998 and the order of the Single
Judge dated 8.3.2001. (946-C-F)
c
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1.11. There is no allegation upon 'A' Group of disbursing excess
payments to themselves as has been alleged against 'N', therefore, they
stand on a different footing from 'N' Group of companies/firms who
have been made entitled to receive only 25% of their claim upon
furnishing of bank guarantee. (946-G-HI
2.1. So far as the workers' claim is concerned, the scheme which
was accepted by this Court on 30.11.1998 contained disbursement of the
payment to all the creditors in the said scheme. The said scheme clearly
mentioned the manner in which the creditors are entitled to receive the
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payment. The statutory dues, such as Provident Fund, E.S.l. and
workers' dues on account of wages, salary are to be liquidated in the
manner as provided therein and unsecured creditors were made entitled
to receive payment @ 2% per month save and except initial payment
@5%. The said scheme was supported by the workers. Unlike unsecured
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creditors, at no point of time workers had come up before the company
Judge or before this Court alleging that payments have not been made
to them pursuant to and in terms of the scheme. [947-A-DI
2.2. The workers having a priority over creditors can come into
play only when the winding-up process is in motion and the Official
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Liquidator take steps to formalize winding-up. In the instant case, after
the scheme had been sanctioned, the question of winding-up would arise
only if the order of permanent stay granted was to be lifted on any
party's complaining of failure of the scheme or inability on the part of
the Company to make payments either in terms of the scheme or
H otherwise. [947-D-FJ
RAD HES HY AM AJITSARIA v. BENGAL CHA TKAL MAZDOOR UNION
923
2.3. The provisions as contained under Section 529A of the
Companies Act, 1956 are not applicable in the facts and circumstances
of the case as the order of winding-up has been stayed and the .:ompany
is being run under the scheme as a going concern. Since the company
still continues to function, Section 529-A of the Companies Act cannot
be pressed into service by the workers. The protection of Section 529-A
is available only when a company has been wound up. Official Liquidator
has taken· over the assets and disbursements are being made by the
Official Liquidator in course of the winding up of the company. There is
no question of the worker claiming a preferential right or payment
while a company is running and carrying on business in the usual course
and incurring daily expenses and liabilities. [948-B-C, 945-D-FJ
2.4. Likewise, the reliance upon the provisions of the Employees'
State Insurance Act, 1948 and Employees Provident Fund Act, 1952 are
inapposite inasmuch as by virtue of orders of this Court as also noted by
the Division Bench of the High Court that the amount to be paid at the
rate of Rs. 8 lacs per month as directed by this Court was to be kept
secured for payment to on-secured creditors only, the workers are
therefore estopped from resorting to taking recourse to the provisions of
Section 11(2) of the Provident Fund Act since the same was available to
them even at the time this Court had directed the said sum to be
earmarked for payments to on-secured creditors. For the purposes of
Sections 441 and 529A of the Companies Act, the phrase "in winding up"
cannot be referred to as "in the course of winding up". Such an
interpretation would not only be contrary to the interest of the workers
and the industry as a whole but would not be pragmatic and would be
contrary to long settled practice in the Company jurisdiction.
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[947-F-H, 951-A-CJ
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2.5. So long as the company continued as a going concern, the
workers not only continued to get their wages and other benefits and
also retained their rights to be reimbursed out of the assets of the
Company in the event that the assets have to be sold in winding up.
[950-E-F]
G
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4101-4103
of 2004.
From the Judgment and Order dated 3.3.2004 of the High Court of
Calcutta in A.P.O.T. Nos. 162, 271-272/2001.
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SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.
WITH
SLP (C) Nos. 6257-6258 of 2004.
Civil Appeal No. 5906 and 5907 of 2004.
Jaideep Gupta, S.K. Bagaria, R.F. Nariman, Sr. Advs., Rana Mukherjee,
Siddharth Gautam, Manju Agarwal, Goodwill lndeevar, Gaurav Kejriwal,
P.C. Sharma, M.K. Michael, Varinder Kumar Sharma, Saurav Kirpal,
Chanchal Kumar Ganguli and Naresh Kumar, Advs. with them for the
appearing parties.
The Judgment of the Court was dehvered by
DR. AR. LAKSHMANAN, J. :
CIVIL APPEAL NOS 4101-4103 OF 2004
These appeals were filed against the final judgments and orders dated
3.3.2004 of the High Court at Calcutta passed in APOT No. 271/2001, APOT
No. 162/2001 and APOT No. 272/2001. By the said final judgments and
orders, the Division Bench of the Calcutta High Court held that the appellants
have to be considered as members of the Nemani Group are not entitled to
receive payments on the ground that the said group being the profounders
of scheme and on the ground that the dues shown by themselves had not
been adjudicated either by the Court or by the Registrar.
SLP NOS. 6257-6258 OF 2004
These special leave petitions were filed by Mis Niraj Trading Company,
a registered partnership firm represented by one of its partner - Shri Krishna
Kumar Nemani and six others (known as Nemani Group). These two special
leave petitions were filed by members of the Nemani Group against the
Bengal Chatkal Mazdoor Union, the Official Liquidator, the Registrar High
Court and Baranagore Jute Factory and the other Mazdoor and Employees
Union. These petitions were filed against the fi[\al judgment and order passed
by the Division Bench of the High Court at Cai~'utta in APOT Nos. 227 of
2001 and 228 of 2001 dated 03.03.2004 whereby the Division Bench has
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allowed the appeal of conte~ting respondent No. I (Bengal Chatkal Mazdoor
RADHESHYAM AIITSARIA v. BENGAL CHATKAL MAZDOOR UNION [LAKSHMANAN, I.] 925
Union) and set aside the order passed by the learned Single Judge dated
08.03.2001 which order had allowed the petitioners Mis Niraj Trading
Company and others of Nemani Group to receive one-fourth of the adjudicated
claim from the Registrar, Original Side of the High Court at Calcutta upon
furnishing a Bank Guarantee to the satisfaction of the said Registrar of the
equivalent amount. The said order was set aside by the Division Bench on
the ground that the claim of the petitioners had not been adjudicated and also
by ignoring the earlier orders dated 30.11.1998 and 0 LI 2.1998 passed by
the Division Bench of the High Court which had held that the claims of the
unsecured creditors including the petitioners had been adjudicated.
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CIVIL APPEAL NOS. 5906 AND 5907 OF 2004
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These appeals were filed by Bengal Chatkal Mazdoor Union and
Baranagore Jute Factory PLC Shramik Sabha respectively against Radheshyam
Ajitsaria, Ashok Ajitsaria, Official Liquidator and Registrar, High Court and
the Barnagore Jute Factory. The above appeals were filed against the final
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judgments and orders of the High Court at Calcutta passed in APOT No. 271
of 2001, APOT No. 162 of 2001 and APOT No. 272 of 2001 dated
03.03.2004. The grievance of the appellants in these two appeals are that the
Division Bench while allowing the appeals did not consider the case of the
Unions and did not direct disbursement of the money to the workers who
were members of the Unions.
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BACKGROUND FACTS:
Baranagore Jute Mills PLC (for short 'the Company') was under the
management of Jardine Henderson Limited. On the failure of the jute factory
to pay dues of several of its creditors, various winding-up petitions were filed
in the High Court under the provisions of the Companies Act, 1956. By an
order dated 28.10.1987, the Company Judge directed winding-up of the
Company. The Court appointed the Official Liquidator with a direction to
take possession of the assets of the said Company. An application was made
by one - Shri Raj Kumar Nemani praying for stay of the winding-up
proceedings of the Company and for revival of the Company as per a Scheme
submitted and for appointment of an ad hoc Committee of Management to
run the affairs of the said Company. The six Unions agreed to the Scheme
as it was to the benefit of the workers. The learned Company Judge stayed
the winding up by order dated 15.9.1988 and appointed an ad-hoc Committee
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SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.
of Management to re-open the mills, but however maintained the assets of
the Company under the Official Liquidator. One of the creditors filed an
appeal against the order dated 15.09.1988. An interim order was passed by
the Division Bench of the High Court appointing Joint Special Officers under
whose supervision the Committee of Management was to be constituted on
an ad-hoc basis with other directions.
Mr. Raj Kumar Nemani being aggrieved by the order dated 27.09.1988
passed by the Division Bench filed a special leave petition before this Court
on 07. I 0.1988 and this Court, by an order dated 30.11.1988 directed that the
scheme proposed by Raj Kumar Nemani supported by the workers and
C unsecured creditors be accepted with a direction for implementation of
detailed Scheme. The learned Company Judge was directed to work out the
Scheme.
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The order passed by this Court on 30.11.1988 reads as under:-
"R.K. Nemani & Anr. v. Shiva & Co. & Others.
ORDER
Special leave granted. Heard, learned counsel for the parties.
Having regard to the scope of this appeal and having considered
the report of the Special Officer, dated 13th November 1988 made
pursuant to the order of this Court, we are of the opinion that the
scheme supported by the workers and unsecured creditors of Raj
Kumar Nemani, be accepted and a detailed scheme on that basis be
formulated. It is desirable that the scheme be implemented as soon
as possible and the workers and the creditors should be paid in
accordance with the scheme, approved today. Further, the appeal
is disposed of with a direction to work out the scheme by the learned
Company Judge, Calcutta High Court, who is seized of the matter.
It is contended by some of the secured creditors that by the
operation of the scheme, the assets of the secured creditors should
not be allowed to be affected. This contention of the secured
creditors may be agitated before the Company Judge, if they are so
entitled. All intervention applications are dismissed without prejudice
to their rights, if any, to applicants move the Company Judge,
RADHESHYAM AJITSARIA v. BENGAL CHA TKAL MAZDOOR UNIDN [LAKSHMANAN, !.] 927
Calcutta High Court.
We expn::ss our appreciation of the work of the Special Officer
and on the report he has submitted. The remuneration of the Special
Officer is filed at Rs.5,500/- and to be paid out of the assets of the
Company. The orders of the learned Single Judge and the Division
Bench are modified to the aforesaid extent.
The appeal is disposed of accordingly, No order as to
costs.
New Delhi,
30th November, 1988."
Sd/-
(Sabyasachi Mukharji)
Sd/-
(S. Ranganathan)
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The learned Company Judge approved the Scheme on 16.6.1989. The
Scheme, inter alia, provides for payment of all unsecured creditors, workers,
secured creditors, statutory dues etc. On 02.05.1990, appellant No. I
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resigned from the Management of the Company.
The learned Company Judge, while considering several applications
made by unsecured creditors complaining that they were not paid by the
Committee of Management, made an order dated 16.12.1991 cancelling the
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Scheme, observing that the Scheme had totally failed.
On an appeal preferred by the Committee of Management against the
order dated 16.12.1991, the Division Bench of the High Court made an
interim order dated 18.12.1981, reiterated on 24.3.1992 directing payment
of 1% of the respective claims to all creditors on or before 7.1.1992. The
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Bench also stayed the order passed by the learned Company Judge dated
.16.12.1991 ordering cancellation of the Scheme. A special leave petition was
filed against the order dated 24.03.1992 by one of the creditors. This Court
directed the appeal pending before the Division Bench of the High Court to
be disposed of expeditiously, while also directing payment to the unsecured
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SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.
A
creditors to be made @ 2% per month from 01.03.1993. The said order dated
22.03.1993 in S.L.P.(C) No. 6505 of 1992 reads as follows:-
B
"Acumen Trading Corporution & Anr. v. Committee of Management
of Baranagore Jute Factory & Ors.
Dated : 22nd March, 1993
Coram:
Hon 'ble The Chief Justice
Hon 'ble Mr. Justice A.S. Anand
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ORDER
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I.
We have heard counsel for all the parties.
2.
By an order dated 16th December 1991, the learned Company
Judge of the Calcutta High Court cancelled the scheme earlier
sanctioned on the ground that the terms of the scheme particularly
in the matter of the schedule of payments to the creditors had not
been complied with. That order was carried up in appeal before the
Division Bench of the High Court, which by its order dated 24th
March 1992 now under appeal, stayed the order of the learned
single Judge. The Division Bench directed that instead of payment
of 2% p.m. to the unsecured creditors contaminated by the scheme,
there should be payment of I% p.m. That was the effect of the order
dated 24th March 1992 of the Division Bench, when it referred to
and incorporated its earlier order dated 18th December 1991.
3.
It is not disputed that payments to the unsecured creditors have
not proceeded strictly in terms of the scheme. There is substantial
short-fall. The parties who have taken over the company under the
scheme and who are liable to effect payments to the creditors in
terms of the scheme cannot take shelter behind the fact that auditors
of the company have not scrutinised the books of account of the
company. That is a matter over which the unsecured creditors have
no control. Till the auditor examine the books of account and report
that the claim of the extent of the claim of the unsecured creditors
was not supportable, there could be no suspension of the scheme
of payments.
RADHESHYAM AJITSARIA v. BENGAL CHATKAL MAZDOOR UNION [LAKSHMANAN, J.] 929
4.
On a consideration of the matter it appears appropriate that the
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appeal before the Division Bench of the High Court requires to be
disposed of expeditiously. We request the High Court to dispose of
the appeal within three months.
5.
In the meanwhile payment to the unsecured creditors should
proceed at the rate of 2% p.m. from 1st March 1993 and not at I%.
The difference for the past on that calculation shall be made good
within three months from today. If there is failure to do so, it will
be appropriate for the Division Bench to put that circumstance also
into scale in deciding whether the order of the learned single Judge
setting aside the scheme should be interfered with in appeal or not.."
6.
However, the order of the Division Bench staying the operation
of the order dated 16th December 1991 of the learned single Judge
will continue unless the Division Bench itself considers it appropriate
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to modify the same in the light of any subsequent event. The
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Division Bench shall also be at liberty to consider any applications
for the modification of the scheme.
With these observations and directions the special leave
petition is disposed of.
Sd/-
(Virender K. Sharma)
Court Master
Sd/-
(S.R. Thite)
Court Master"
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By subsequent orders, this Court directed the Committee of Management
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to deposit Rs. 40 lacs in two instalments which was to be deposited in the
Registry of this Court. The said amount was kept in term deposits. On
11.03.1994, this Court set aside the order of the Division Bench of the
Calcutta High Court passed on 24.03.1992 reducing rate of payment from
2% to!%. This Court also directed the Committee of Management to deposit
from the month of April, 1994 onwards a sum of Rs. 8 lacs per month with
the Registry of Calcutta High Court. Further directions were also issued
while remanding the matter back to the learned Company Judge for
distribution of Rs. 40 lacs amongst the creditors. The above order reads as
follows:-
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"Acumen Trading Corporation & Anr. v. Committee of Management
of Baranagore Jute Factory & Ors.
ORDER
We have heard counsel on both sides, originally the learned
Company Judge in the High Court directed the ''Committee of
Management" to deposit sums equivalent to 2 per cent per month
calculated on the basis of the extent of unsecured indebtedness of
the company. Subsequently, there was a modification of this order
as to the rate of the payment reducing the extent from 2 per cent
month to 1 per cent per month. This was done by the appellate
bench. The unsecured creditors have come up against this order.
The unsecured creditors claim that debts due and owing to them are
in the neighbourhood of Rs.3 .4 crores and that it would take a Jong
time for payment if only 1 % per month is paid.
In the meanwhile, the Committee of Management has deposited
in the Registry of this Court, a sum of Rs.40 lacs under directions
of this Court. The said sums are in term-deposits with the bank.
On a consideration of the matter, we set aside the order of the
Division Bench reducing the amount from 2 per cent per month to
I per cent per month. The Committee of Management shall from
the month of April 1994 onwards, deposit every month sum of
Rs. 8 lacs. Deposits will be made in the High Court.
The matter will now go back to the learned company Judge,
Calcutta High Court who will issue necessary directions as to the
appropriation and distribution of Rs. 40 lacs now in deposit,
amongst the creditors and also as to the distribution of the sum of
Rs. 8 lacs to be deposited every month by the Committee of
Management. It is made clear that ifthe Committee of Management
commits default in the matter of these deposits and fall in arrears
for any two months, it will be appropriate for the Company Court
to replace the Committee of Management by an appropriate
alternative mechanism. The amount of Rs.40 lacs in deposit in this
Registry shall be transferred to the account of the Registrar
(Original Side), High Court of Calcutta, together with accrued
RADHESHYAM AJJTSARIA v. BENGAL CHA ITAL MAZDOOR UNION [LAKSHMANAN, !.] 931
interest immediately after the present deposits mature.
A grievance was aired by the petitioners that the. Committee
of Management is appropriating to itself the funds of the Company
towards its alleged claims as unsecured creditor. Sri Santosh Hegde
says this is impermissible. It is open to the petitioners to move the
Company Judge in this regard. The contention of the Committee of
Management on this point is also left open.
The interlocutory applications are disposed of accordingly.
New Delhi,
March 11, 1994."
Sd/-
CJI
Sd/-
(S. Ratnavel Pandian)
On 13.12.1994, the learned Company Judge appointed a new Committee
of Management composed of the Jain-Jalan group, while issuing necessary
directions for deposit of Rs. 64 lacs by the Jain-Jalan group with the Registrar
of the High Court. The Company Judge also directed certain lump sum
payments to six substantial creditors, except Nemani Group on the basis of
the list approved in the Court's Scheme prior to cut-off dates in October,
1987 before issuing advertisement inviting claims from creditors, while
directing payments to be made to certain parties.
In appeal against the said order dated 13.12.1994, the Division Bench
allowed the Jain-Jalan group to continue and carry on with the process of
the Scheme, but set aside the direction for preferential payment to six named
unsecured creditors.
The learned Company Judge by order dated 23.12.1996 also directed
all unsecured creditors to lodge their claims with the Registrar of the High
Court. The learned Company Judge, on the note of the Registrar, directed,
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inter alia, the Registrar of the High Court to confine to the claims of those
unsecured creditors as on 28. I 0.1987 i.e. the date of winding-up order and
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the amounts quantified against their names in the list of unsecured creditors
appended to the Company Application No.63 of 1987 affirmed on 27 .4.1997.
Pre-scheme unsecured creditors including the appellants lodged their respective
claims with the Registrar on 27.02.1997. The Registrar submitted the second
report excluding the names of the appellants (Radheshyam Ajitsaria) while
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including the name of the Nemani group. The Company Judge, on an
application filed by the appellants (Ajitsaria's group) directed the Registrar
to hear to the submissions of the appellants with regard to their exclusion.
The appellants made their submissions and filed written notes in support of
their contentions before the Registrar and thereafter the Registrar, on
23.04.1997, submitted a report including names of the appellants (Ajitsaria's
group) as persons entitled to receive payments in terms of the Scheme. The
Company Judge, by a detailed judgment dated 9.9.1998 directed the
Registrar to make payments of all creditors as per the revised statement
enclosed to the Supplementary (Second) Report, except to the Nem:ini group.
The Division Bench, in an appeal against the order dated 09.09.1998 filed
by Jardine Handerson Ltd .. made an order on 30.11.1998/1.12.1998 set aside
the Registrar's report insofar as the same exceeded the amount mentioned
in the list annexed to Company App In. No.63 of 1987. The Registrar, despite
the appellants not being held as part of the Nemani group, however, did not
make any payments to the appellants. The appellants filed an application by
way of Notice of Motion, inter alia, praying for modification of the order
dated 09.09.1998 and for a further direction not to treat the appellants as part
of the Nemani group with a further prayer for immediate payment in terms
of the sanctioned Scheme. On 08.03.2001, the learned Company Judge
directed payments to be made to the appellants, inter alia, holding that the
appellants were not the part of the Nemani group and that their claims were
already adjudicated upon and settled by the Registrar, Original Side.
One Shri Chetan Chowdhury claiming himself to be one of the
Directors of the Company filed an appeal against the order dated 08.03.2001.
The Division Bench, while granting liberty to the appellants to withdraw the
amount deposited against its name/claim by furnishing a Bank Guarantee
also recorded that it is not clear as to why Chetan Chowdhury and his group
could be in the possession of the Company and listed the appeal for further
directions.
On 14.05.2001, the appellants - Ajitsaria's group received payments
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RAD HES HY AM AJITSARIA v, BENGAL CHA TKAL MAZDOOR UNION [LAKSHMANAN, I.] 93 3
Guarantee. Learned single Judge of the High Court passed an order on
19.12.2002, inter alia, holding that the possession of the Company by the
alleged Board of Directors was wrongful, while directing the Official
Liquidator to take possession of the Company (in liquidation). Several
appeals were preferred from the order. The Division Bench, while staying
the operation of the order dated 19 .12.2002, directed the Joint Special
Officers to take possession.
The Division Bench in appeals filed against the order dated 08.03.2001
made an order dated 3 .3 .2004 directing re-adjudication of the claims of the
appellants which had already been adjudicated. According to the appellant,
the Division Bench without appreciating that the appeal itself was not
maintainable having been filed by 9 outsiders having no locus standi is not
correct in directing re-adjudication of the claims of the petitioner. The Bench
also dis-allowed the appellant's rights to claim the said amount as a member
a'pproved in the list of unsecured creditors distinct from the Nemani group.
Being aggrieved by the impugned judgment dated 3.3.2004, the appellants
filed the above appeals in this Court. This Court, on 08.04.2004, issued
notices in the special leave petitions and also directed that the Bank
Guarantee filed by the appellants with the Registrar of the High Court on
· t!J.e original side shall be kept renewed until further orders. By order dated
12'.07.2004, leave was granted.
The Registrar of the High Court issued two certificates, inter alia,
certifying that the last instalment of Rs. 8 lacs was deposited on 8/9.12.1999
and also certified that a sum of Rs. 2,09,70,647.56 p. was lying with the
Registrar in a separate account.
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We heard Mr. Jaideep Gupta, learned senior counsel appearing for the
petitioners in S.L.P.(C) Nos. 6257-6258 of 2004, Mr. Rana Mukherjee,
learned counsel appearing for the appellants in Civil Appeal Nos. 4101-4103
of 2004, Mr. Varinder Kumar Sharma, learned counsel, Mr. S.K. Begaria,
leaned senior counsel, Mr. R.F. Nariman, learned senior counsel and Mr.
Naresh Kumar, learned counsel appearing for the respondents.
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Mr. Jaideep Gupta, learned senior counsel appearing for petitioner
No. I, Mis Niraj Trading Company and Raj Kumar Namani, petitioner No.4,
submitted that the High Court has erred in holding that the dues shown
against the members of Nemani Group were shown by themselves and that
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dues of the Nemani Group have not been adjudicated by the High Court or
by the Registrar. He would submit that the High Court has failed to
appreciate that the disbursement by Registrar took place after submission of
the third report dated 10.4.1997 and the payment to pre-scheme unsecured
creditors were available with the Registrar, Original side. According to Mr.
Jaideep Gupta, the Division Bench should not make any discrimination
amongst the same category of pre-scheme unsecured creditors mentioned in
the list annexed to the scheme of management who have lodged their claims
with the Registrar, Original side.
Mr. Jaideep Gupta, learned senior counsel, submitted that the Judges
of the Division Bench have erroneously concluded that the petitioners were
not part of the pre-scheme creditors and that their names were not included
in the list of pre-scheme creditors filed along with C.A.No. 63 of 1987 and
that the Bench has also erred in holding that the claims of the petitioner had
not been adjudicated which was clearly contrary to the report of the
Registrar, original side, which was accepted by both the Judges as well as
the Division Bench. It was further submitted that at the present stage the
workers do not have a right to oppose the payment to the Nemani Group
out of the funds lying with the Registrar, original side. In the light of the
above, Mr. Jaideep Gupta submitted that there is nothing on record justifying
withholding of payments to the petitioner-group, who undoubtedly were prescheme creditors and whose claims had been finally adjudicated upon by the
Registrar, original side, which adjudication has been upheld both by the
learned single Judge as well as by the Division Bench. Further based on such
adjudication all other unsecured creditors have been paid, while only 25%
of the total amount due and payable to the petitioner-group has been directed
to be paid by the learned single Judge by the order dated 8.3.2001. The funds
available at the hands of the Registrar is far in excess not only of the 25%
ordered to be paid but in excess of the entire claim of the petitioner-group.
It was also submitted by Mr. Jaideep Gupta that a sum of Rs. 42 crores which
was received by way of acquisition compensation is now with the company.
This apart, the assets are also lying with the company. In these circumstances,
it is submitted that it is only just and proper that the order passed by the
learned single Judge be upheld and payments be made to the Nemani Group.
It is also pertinent to notice that all other unsecured creditors including
Jardine Henderson (the original management at the time when the winding
up order was passed) and the Jain Jalan Group (being in management after
1994) have been fully paid their dues as unsecured creditors out of the funds
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RADHESHYAM AJJTSARIA v. BENGAL CHATKAL MAZDOOR UNION [LAKSHMANAN, J.] 935
in the hands of the Registrar, original side.
Mr. Jaideep Gupta took us through the pleadings, annexures and orders
passed thereon on various occasions by different Courts.
Mr. Rana Mukherjee, learned counsel, appearing for the appellants in
Civil Appeal Nos. 4101-4103 of 2004 submitted that appellant No. I
remained as a member of the Committee of mariagement only for a period
of 11 months having resigned on 2.5.1990 and that appellant No.2 never
participated in the management and affairs of the company (in liquidation)
and no one including the workers made any claim and/or grievance against
the appellants at any point of time.
The said fact has been duly noticed and recognized in various Court
orders including the order of the Division Bench dated 30.11.1998 and ·
l.12.1998 and the order of the Registrar dt. 8.3.2001. According to Mr. Rana
Mukherjee, the appellants' firm Radheyshyam & Co. and Indian Agency
never formed part of Nemani Group and the same would be evident from
the letters written by the workers' Union and submitted before the Company
Court. The appellants are the unsecured creditors of the Company who were
entitled to receive payment in terms of the Scheme @ 2% p.m. at the entire
payment in terms of the said Scheme without interest was to be disbursed
to them within a span of four years and two months and accordingly the
entire amount became due and payable in the year 1993 itself. There is also
rio allegation upon the appellants to disburse excess payments to themselves
as has been alleged against Raj Kumar Nemani, therefore, the appellants
stand on a different footing from the Nemani Group of Companies/firms who
have been made entitled to receive only 25% of their claim upon furnishing
of bank guarantee. It was also submitted that the appellants have received
their dues as certified by the Registrar of the Calcutta High Court under
orders of the said Court upon furnishing a bank guarantee which has been
kept alive. According to Mr.