Full Judgment Text
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PETITIONER:
WORKERS OF ROHTAS INDUSTRIES LTD.
Vs.
RESPONDENT:
ROHTAS INDUSTRIES LTD.
DATE OF JUDGMENT24/10/1989
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
SAWANT, P.B.
RAMASWAMY, K.
CITATION:
1990 AIR 481 1989 SCR Supl. (1) 615
1989 SCC Supl. (2) 481 JT 1989 Supl. 288
1989 SCALE (2)873
ACT:
Sick Industrial Companies (Special Provisions) Act.
1985: ss.4 & 10---Rohtas Industries Ltd.--Rehabilitation
of--Directions far.
HEADNOTE:
Four large industrial units owned by the respondent-
company were closed down with effect from September 9, 1984
resulting in denial of employment to about 10,000 employees.
In the writ petition, the workmen sought immediate payment
of salary and wages for the period since closure and compen-
sation as per the amendment to the Industrial Disputes Act
in 1984 and payment of dues under the provident fund ac-
count, gratuity etc. The High Court had in the meantime on
May 22, 1986 appointed a provisional liquidator under the
Companies Act.
This Court on October 29, 1987 had directed the Central
Government to make a reference to the Board constituted in
terms of s.4 of the Sick Industrial Companies Act, 1985,
which had come into force, to frame a scheme as contemplated
under s. 10 thereof for revival of the company and submit it
for consideration of the Court within four months time. On
September 7, 1988, the Court took note of the fact that the
State of Bihar was inclined for nationalisation of the
company and directed a committee with the Industries Secre-
tary to the Union of India as its Chairman to be immediately
constituted to work out the modalities of nationalisation.
On December 13, 1988 the Court considered the report of the
committee indicating that three units, excepting paper and
boards unit, were viable and could be revived, and adjourned
the matter to give an opportunity to the parties to explore
the possibilities of revival of the viable units. Till
August 8, 1989 no substantial progress had been made. There-
after the State of Bihar and the Union of India filed their
statements separately and the memorandum prepared by the
Attorney General was also made available to the Court.
In this background the Court,
HELD: 1. Living to about 10000 families has been denied
for over five years and apart from national loss, the work-
men have been
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616
put to serious jeopardy. There is a huge amount of wages
outstanding to them. Several financial institutions have
large dues to recover from the company. The Trustees of the
Debenture Trust Deeds have also sought to intervene to
maintain their claim. Apart from these, the owners of the
company have also pleaded that they are entitled to compen-
sation in the event of the properties of the company being
taken away by way of nationalisation. A lot of assets are
fast becoming useless and will soon become junk. If the
company gets liquidated, the liabilities would turn out to
be far in excess of the assets and notwithstanding first or
second charge on the assets, the creditors may not apprecia-
bly benefit. It is, therefore, of paramount importance that
the company in respect of viable units should be revived and
allowed to come into production. [620D, A-C]
2.1 The State of Bihar is directed to appoint an autho-
rised officer to be the Rehabilitation Administrator. [620H]
2.2 The Provisional Liquidator appointed by the High
Court shall hand over to the Administrator all the assets of
the company which he had taken over under orders of that
Court. The assets of the company not yet taken over shall
vest forthwith in the Administrator. [621A]
2.3 The assets of the company encumbered with financial
and other institutions shall not be available to be proceed-
ed against for a period of one year, and there shall be a
moratorium for a period of one year in regard to proceedings
taken and pending or to be taken against the company hereaf-
ter, and limitation shall remain suspended for the period.
[621D-E]
2.4 The State Government of Bihar shall deposit within
eight weeks an amount of Rs. 15 crores with the Administra-
tor against the cost of assets to be taken over. A similar
sum of Rs. 15 crores shall be advanced by the Union of India
to the State from out of plan assistance. The sum paid by
the State shall be utilised, in due course for payment of
arrears of wages of the workers and for disbursement of
secured loans of financial institutions and other parties
for which security of the company’s assets had been fur-
nished. The Administrator shall open an account with the
lead nationalised bank for the State operating at Dalmiana-
gar into which the two sums of money shall be credited.
[621F-H]
2.5 The Administrator shah set up a Committee with a retired
617
High Court Judge, a retired District Judge and an Accounts
Officer to examine the claims of the owners of the company
and other parties including financial institutions within
six months and to report the matter to the Court for direc-
tions. [622A]
2.6 An inventory of all the articles shall be made
within four weeks. Steps shall be taken to form a new compa-
ny within four weeks. Appointment of technical consultants
and other competent officers shall be undertaken within two
months. The retrenched employees shall come back to work in
phases. Steps shall be taken to explore the viability of the
paper unit within three months after the company is recom-
missioned in respect of the three units. Liberty is given to
the parties to apply in the event of necessity. [622C-D & E]
2.7 The case shall remain pending, to be called again on
March 1, 1990. [622H]
JUDGMENT:
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ORIGINAL JURISDICTION: Writ Petition No. 5222 of 1985.
(Under Article 32 of the Constitution of India)
(With Writ Petition Nos. 443 and 754 of 1988)
R.K. Garg, S.K. Verma, P. Anshu Mishra and R.S. Singh
for the Petitioners in Writ Petition No. 5222 of 1985.
G.B. Pai and S.K. Sinha for the Petitioners in Writ
Petition No.754 of 1988.
K. Parasaran, Attorney General, G. Ramaswamy, Additional
Solicitor General, Ms. A. Subhashini, Probir Mitra and K.
Swamy for the Respondents.
The following Order of the Court was delivered:
Workmen of Rohtas Industries Limited situated at Dalmi-
anagar in District Rohtas within the State of Bihar sent a
letter addressed to Hon’ble the Chief Justice of this Court
on 8th of July, 1985, alleging that the Company had four
units, namely, paper and boards, cement, asbestos and vege-
table ghee plant; the management closed down the industries
with effect from 9th of September, 1984, and have denied
employment to about 10,000 employees. It was prayed that
there should be immediate restoration of electricity to the
colony, payment
618
of salary and wages for the period since closure should be
directed and compensation as per the amendment to the Indus-
trial Disputes Act in 1984 and dues under the provident fund
account, gratuity etc. should also be directed to be paid.
This letter was registered as a writ petition and notice was
issued. In the meantime by order dated 22.5. 1986, the Patna
High Court appointed a Provisional Liquidator under the
Companies Act. In the writ proceedings before this Court the
employers, the Provisional Liquidator, the State of Bihar
and the Union of India have, in due course, appeared.
On 27.4.1987, the Court made an interim order in the
matter of payment of arrear-wages by sale of assets. On
22.7.1987, the Court took note of the fact that the proposal
for restructuring of the Company was afoot in terms of its
suggestion and stated that claims of the financial institu-
tions would be considered later. On October 28, 1987, the
Court stated:
"This Court had issued notice to the Union of
India and learned Attorney General to ascer-
tain if it is possible to revive the company
which has suddenly gone sick. Learned Attorney
General states that in the meantime Sick
Industrial Companies (Special Provisions) Act,
1985 which received assent of the President on
8th January, 1986 has come into force and a
Board in terms of section 4 thereof has now
been constituted. He suggests that a reference
may be made to that Board and the Board may be
called upon to frame the Scheme as contemplat-
ed under section 18 of the Act for revival of
the company and instead of allowing the Scheme
to be dealt with further under the Act, the
Board may be called upon to submit its Report
along with the Scheme for consideration of
this Court. He also submits that in the spe-
cial facts of the case there is no necessity
to subject the Scheme to a statutory appeal.
Counsel for the petitioners agrees that an
effort may be made as per the suggestion of
the learned Attorney General."
The Central Government made a reference to the Board within
one week as directed by the Court and the Board was given
four months’ time to frame the Scheme. On 7.9.1988, this
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Court took note of the fact that the State of Bihar was
inclined for nationalisation of the Company. The Union of
India filed an affidavit that if any proposal is mooted for
nationalisation, it would be supported. This Court stated in
this order of 7.9.1988:
619
"On examining the matter in this background we
are of the view that it is in the interest of
everyone that the industrial establishment
should be revived and sooner it is the better.
In these circumstances, we direct that a
Committee with the Industries Secretary of the
Union of India as its Chairman be immediately
constituted to work out the modalities of
nationalisation. The Committee should consist
of the Secretary, Industries, Government of
Bihar, senior representatives of the creditor
financial institutions, Finance Secretary of
Government of India or his representative and
representative of Reserve Bank of India. The
Committee should examine the matter and submit
its report within six weeks ........... "
On 9.8.1989, the Court took note of the report
by saying:
"The report submitted to this Court indicates
that three units excepting paper unit are
viable and can be revived. On the 13th of
December, 1988, this Court considered the
report and adjourned the matter to give an
opportunity to the parties to explore the
modalities of revival of the three viable
units. No substantial progress has been made
as we find. By the adjourned date the modali-
ties should be discussed and finalised and
reported to the Court so that an order can be
made to revive the three units.
The report indicated that in regard
to paper unit, the Committee was not of the
opinion that it was viable. Learned Attorney
General and Mr. Pal had been requested by the
Court to explore the possibilities of revival
of the paper unit. Ms. Subhashini on behalf of
the learned Attorney General states that given
two weeks’ time further discussions shall be
held and a complete decision may be reached as
regards the paper unit .......... "
A joint memorandum was filed by the Union of India and the
State of Bihar on 12.9.1989 which the Court rejected on
account of the fact that there was no clear and definite
indication in the memorandum as to revival. Thereafter, the
State of Bihar and the Union of India have filed their
statements separately and a copy of the memorandum prepared
by the learned Attorney General and circulated has also been
filed before us. We have also heard learned counsel for the
parties in the matter.
620
It is not disputed that there is a huge amount of wages
outstanding to the workmen. Several financial institutions
have large dues to recover from the Company. The Trustees of
the Debenture Trust Deeds have also sought to intervene in
this Court to maintain their claim. Apart from these, the
owners of the Company have also pleaded that they are enti-
tled to compensation in the event of the properties of the
Company being taken away by way of nationalisation.
As already noted, the Company has been closed down for
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more than five years now. A lot of assets are fast becoming
useless and will soon become junk. Several attempts were
made to dispose of some of the stocks held by the Official
Liquidator but for one reason or the other it has not been
possible to complete the sale and though this Court had
directed that the sale proceeds would be utilised for pay-
ment of arrears-wages, that has not been feasible. Claims
have been laid against the Company and are perhaps awaiting
adjudication. If the Company is not revived and gets liqui-
dated, the liabilities would turn out to be far in excess of
the assets and notwithstanding first or second charge on the
assets, the creditors may not appreciably benefit. This
Court cannot lose sight of the fact that living to about
10,000 families had been denied for over five years and
apart from national loss, the workmen have been put to
serious jeopardy. In these circumstances, we are satisfied
that it is of paramount importance that the Company in
respect of the viable units should be revived and allowed to
come into production. Unless there be a moratorium in regard
to the liabilities of the Company for a reasonable time, the
attempt to revive the Company in respect of the three units
is bound to be frustrated upon the intervention of the
creditors, whereas once the company is revived and big
commercial activities are carried on, profit is bound to be
earned and a conscientious and prudent administration would
certainly, in due course, provide adequate funds for satis-
faction of the debts. At present the question is one of
priorities. It has to be prudently decided as to which ones
should be allowed to go ahead and which should be made to
wait.
In this background and on the basis of the memoranda
filed by the State of Bihar and the Union of India and the
note prepared by learned Attorney General and made available
to us by Mr. Pal for the other side with the Attorney Gener-
al’s consent, we give the following directions:
1. The State of Bihar shall appoint an authorised officer
from the Senior IAS cadre with appropriate commercial back-
ground
621
to be the Rehabilitation Administrator.
2. The Provisional Liquidator appointed by the High Court of
Patna shall hand over to the Administrator all the assets of
the Company which he has taken over under orders of the
Court. Such assets of the Company which have not yet been
taken over by the Provisional Liquidator shall upon the
appropriate officer being designated vest in him forthwith
and he is clothed with the necessary power under our present
orders to take such steps as are necessary to take over
possession of such assets of the Company. In the event of a
dispute arising out of the decision of the Administrator
that the asset is of the company and is to be taken over by
the Administrator, an appeal shall be maintainable before a
Division Bench of the Patna High Court and the Judges to
constitute such Bench shall be nominated by the learned
Chief Justice. For convenience the same Judges shall contin-
ue on the nominated Bench for a reasonable period.
3. The assets of the Company encumbered with financial and
other institutions shall not be available to be proceeded
against for a period of one year from today and there shall
be a moratorium for a period of one year in regard to pro-
ceedings taken and pending or to be taken against the Compa-
ny hereafter and limitation shall remain suspended for the
period under our orders of today. It would be open to the
Court on being moved to extend the moratorium.
4. The costs of the entire assets to be taken over by the
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State Government of Bihar as per the book value and the dues
against the company are estimated to be within the limit of
Rs. 15 crores. The State Government of Bihar has undertaken
before us to deposit the amount of Rs. 15 crores with the
Administrator within eight weeks from today. A similar
amount of Rs. 15 crores shall be advanced by the Union of
India to the State of Bihar from out of plan assistance for
the State. The sum of Rs. 15 crores paid by the State Gov-
ernment shall be utilised, in due course, for payment of
arrears of wages to the workers and for disbursement of
secured loans of financial institutions and other parties
for which security of the Company’s assets had been fur-
nished. The Administrator shall open an account with the
lead nationalised Bank for the State of Bihar operating at
Dalmianagar into which the two sums of money being Rs. 15
crores each shall be credited.
622
5. The Administrator shall set up one Committee with a
retired High Court Judge, a retired District Judge and an
Accounts Officer with at least five years’ experience as
Financial Advisor to the State Government to examine the
claims of the owners of the Company and other parties in-
cluding financial institutions. This should be done within
six months from now. Once the list of creditors is settled
with all reasonable particulars, the matter should be re-
ported to this Court for directions and it shall be open to
this Court to finally indicate the figure at which each such
claim shall be settled.
An inventory of all the articles shall be made within
four weeks from now. Steps shall be taken to form a new
company within four weeks from now.
Appointment of technical consultants and other competent
officers shall be undertaken within two months hence.
The asbestos, cement and vanaspati plants shall be
commissioned after effecting such repairs as may be neces-
sary.
The retrenched employees shall come back to work in
phases. The first phase shall admit a thousand workers, the
second phase shall admit an equal number and in the third
phase, such number of further workers as may be necessary to
run the industries in a viable way shall be finalised. All
expeditious steps as may be possible shall be taken to
provide employment.
Steps shall be taken to explore the viability of the
paper unit within three months after the Company is re-
commissioned in respect of the three units. Liberty is given
to the parties to apply in the event of necessity but it is
made clear that no extension in regard to payment of the
fifteen crores of rupees by the State Government and the
Union Government shall be granted. Every attempt should be
made by all concerned to give effect to the order keeping
its true purport and spirit in view. We do not intend to
leave doubts in any one’s mind that the purpose of our order
is to revive the Company and make it work viably. Everyone
charged with the responsibility of implementing the order of
the Court shall, therefore, be expected to work in such a
way as would fulfil that purpose.
We direct that the case shall remain pending in this
Court and shall not be taken to have been disposed of by
this order. Call the case on 1st of March, 1990.
P.S.S.
623