Thursday, March 14, 2013

न्यायपालिका और विधायिका के बीच टकराव


पड़ोसी देश में न्यायपालिका और विधायिका के बीच की  टकराहट ने पूरे बिश्व का ध्यान खींचा है.एक पूर्व प्रधान मंत्री तो फांसी पर लटका दिए  गए . अनेक बर्तमान नेता बिदेश में प्रवास कर अपने पक्ष में अनुकूल माहौल बनने-बनाने का इंतज़ार कर रहे हैं.
मुख्य न्यायाधीश इफ्तिखार चौधरी की अध्यक्षता में तीन सदस्यीय सुप्रीम कोर्ट पीठ ने सरकार से औपचारिक मंजूरी के बिना शैक्षिक योग्यता, कर भुगतान और उम्मीदवारों की दोहरी नागरिकता से संबंधित नियमों में संशोधनों के चुनाव आयोग के प्रयासों का समर्थन किया था।. पीठ ने चुनाव आयोग को कानून मंत्रालय की स्वीकृति बिना अपने नियमों में बदलावों पर आगे बढ़ने का निर्देश दिया। साथ ही कहा कि सुप्रीम कोर्ट के एक पूर्व फैसले में इसकी अनुमति दी गई थी।
कानून मंत्री फारुक नाइक ने कहा कि इस प्रकार के संशोधनों को पहले राष्ट्रपति की मंजूरी मिलनी चाहिए। सांसदों ने नामांकन पत्रों में बदलाव का विरोध किया है ।
विशेषज्ञों का कहना है कि शीर्ष अदालत के फैसले ने राष्ट्रपति की मंजूरी के बिना संशोधित नामांकन पत्रों को छापने के चुनाव आयोग के फैसले को कानूनी चुनौती देने के रास्ते बंद कर दिए हैं।
मई में शांतिपूर्ण चुनाव कराने के लिए सेना की तैनाती को लेकर पाकिस्तानी सेना और चुनाव आयोग के बीच बैठक जल्द होगी। इंटर सर्विस पब्लिक रिलेशन के प्रमुख मेजर जनरल असीम सलीम बाजवा ने कहा, 'हमने चुनाव आयोग को समर्थन और सुरक्षा प्रदान करने का आश्वासन दिया है।'
पाकिस्तानी चुनाव आयोग ने सरकार के विरोध को दरकिनार करते हुए संशोधित नामांकन पत्रों को छपवाने के अपने फैसले पर आगे बढ़ने का फैसला किया है।
पूर्व के घटनाक्रम के लिए देखे ( http://goo.gl/ezLy2http://goo.gl/YL0b4 )

बिधायिका व कार्यपालिका में तो आये दिन टकराव देखने को मिलता है.    
पश्चिम बंगाल  राज्य के चर्चित आइपीएस अफसरों में शुमार नजरूल इस्लाम ने मुख्यमंत्री ममता बनर्जी को भ्रष्टाचारियों की आश्रयदाता बताया है। उन्होंने यह टिप्पणी मुख्यमंत्री को लिखे 76 पेज के पत्र में की है। यह पत्र नजरूल ने पिछले दिनों ममता ने उन्हें जन्मदिन पर भेजे शुभकामना संदेश के जवाब में लिखा है। मुख्यमंत्री बनने के बाद ममता ने नजरूल को वक्फ बोर्ड का चेयरमैन पद संभालने को कहा था। जब वह तैयार नहीं हुए तो मुख्यमंत्री क्षुब्ध हो गई। यह सब बातें लिखने के बाद नजरूल ने लिखा है कि इसी कारण से पिछले डेढ़ वर्ष में कई बार उन्हें महत्वहीन पदों पर तबादला किया गया। इतना ही नहीं उनकी लिखी किताब को गलत बता कर उन्हें शोकाजचार्जशीट देने के साथ उनकी पदोन्नति भी रोक दी गई है।
इसी तरह नियंत्रक एवं महालेखा परीक्षक (कैगने अपनी रपट में कोयला खदानों के आवंटन में मनमानी का आरोप लगाने के साथ एक लाख 86 हजार करोड़ रुपये की राजस्व हानि की बात कही थी। कोयला खदान आवंटन की जांच कर रही सीबीआइ ने सुप्रीम कोर्ट को सौंपी प्रगति रपट में कहा है कि खदानों का आवंटन मनमाने तरीके से और बिना छानबीन के किया गया। सुप्रीम कोर्ट ने इसको प्रथमदृष्टया सही मानते हुए कहा है कि ऐसा लगता है कि आवंटन में नियमों का पालन नहीं हुआ। न्यायमूर्ति आरएम लोढ़ा की अध्यक्षता वाली तीन सदस्यीय पीठ ने कहाअगर केंद्र ने आवंटन के आवेदकों के साथ तय प्रक्रिया का पालन नही किया तो पूरा आवंटन रद होगा। सुप्रीम कोर्ट ने सरकार की परेशानी बढ़ाते हुए सीबीआइ को यह भी हिदायत दी कि वह अपनी जांच से जुड़ी जानकारी राजनीतिक नेतृत्व यानी सरकार से साझा न करे।
·         इसके बिपरीत नेपाल में मुख्य न्यायाधीश रेगमी प्रधानमंत्री बने
 नेपाल के मुख्य न्यायाधीश खिलराज रेगमी कार्यकारी सरकार के मुखिया होंगे। उन्होंने गुरुवार को देश के नए प्रधानमंत्री के रूप में शपथ ली। कार्यकारी सरकार के नेतृत्व में 21 जून को चुनाव कराए जाएंगे। इसके साथ ही महीनों से चला आ रहा राजनीतिक और संवैधानिक संकट समाप्त हो गया है। नेपाल के राजनीतिक इतिहास में यह पहला मौका है जब वर्तमान मुख्य न्यायाधीश को सरकार प्रमुख बनाया गया है।
तीन प्रमुख राजनीतिक दलों और यूनाइटेड डेमोक्रेटिक मधेसी फ्रंट [यूडीएमएफ] के शीर्ष नेताओं ने बुधवार को चुनावों की देखरेख के लिए कार्यकारी सरकार गठित करने को लेकर 11 सूत्रीय समझौते पर हस्ताक्षर किए थे। जिसके तहत 63 वर्षीय रेगमी ने कार्यकारी सरकार के प्रमुख के तौर पर शपथ ली। 


Tuesday, March 12, 2013

कम्प्यूटराइजेशन और नकारा सिस्टम


नवभारत टाइम्स के सम्पादकीय टिप्पणी से नकारा शब्द लिया गया है. क्यों नकारा कहा गया है ? आप किसी भी दफ्तर में वाजिब कार्य हेतु अपनी दरखास्त लगाएं तुरंत जबाब मिलेगा यह काम नहीं हो सकता,इस नियम,अधिनियम और जनहित के खिलाफ है.यह कहने पर कि आपके वेबसाईट पर तो इसको नियम सम्मत कहा गया है ,उत्तर मिलेगा तो वेब साईट से करा लीजिये.
इसका एक अपवाद भी है,नेता .उसके मामले में सिस्टम सकारात्मक है -- http://goo.gl/F1ebR
 पहला  किस्सा बंगलोर का है जो कम्प्यूटर टेक्नोलाजी का हब है तथा ई-गवर्नेंस में भारत का मानक भी. http://goo.gl/3NgYW
 आज भी यह खेल  धड़ल्ले से हो रहा है.अंतर यह है कि पहले अफसर फाईल पर लिखने का खेल करता था,अब वहीं कार्य नेता से कराता है. एक ही फाईल पर     sanctioned
 Not, sanctioned
 Note,     sanctioned
लिखने की हिम्मत अफसर ही कर सकता है ,जो आज बखूबी नेता से करा लेता है.
 एक दूसरा मामला राजस्थान से है .यह भी जमीन ,जंगल से जुडा है.जंगल जमीन पर कम हो रहे हैं लेकिन कागज़ में सुरक्षित हैं. http://goo.gl/MA3xf
पेड़ों की धड़ल्ले से कटाई हो रही है, वन रक्षक हैं ही नहीं। कार्यालय में बैठकर अफसर सिर्फ कागजी कार्रवाई करते हैं। जंगल बचाने हैं तो लगातार घूमकर आकस्मिक निरीक्षण होने चाहिए
बाबू लाल जाजू, पर्यावरणविद्
10 साल में इतना अन्तर
2011: वन आच्छादित क्षेत्र- 16087 वर्ग किमी.
घना वन क्षेत्र- 4520 वर्ग किमी.
खुला वन क्षेत्र- 11567 वर्ग किमी.
2001: वन आच्छादित क्षेत्र- 16367 वर्ग किमी.
घना वन क्षेत्र- 6322 वर्ग किमी.
खुला वन क्षेत्र- 10045 वर्ग किमी.
अरविंद सिंह शक्तावत
 तीसरा मामला बिट्टी मोहंती के पिता एवं ओड़िशा के पूर्व पुलिस महानिदेशक बी बी मोहंती  आईपीएस का है http://goo.gl/MnBbs

Saturday, March 9, 2013

Computerization of land records


उत्तर-प्रदेश में जमीन का कम्पूटराइजेशन-आंकड़े व हकीकत
    उत्तर-प्रदेश में जमीन के सम्बन्ध में कानूनों का मकडजाल है.इनकी ब्याख्या जब अफसर करते है तो स्थिति और उलझती है. नोटिफिकेशन की ब्याख्या से आये दिन यह सिद्ध होता है कि बनाने वाला,उसको लागू करने वाला,तथा प्रभावित ब्यक्ति भिन्न-भिन्न ब्याख्या करते हैं.एक ही नोटिफिकेशन की उप-सचिव,विशेष सचिव,सचिव,प्रमुख सचिव तथा मुख्य सचिव भिन्न-भिन्न अर्थ निकालते हैं. भिन्न-भिन्न अर्थ करने को  न्याय का सर्व मान्य  सिद्धांत बताते हैं कि ५ जजों की बेंच में ४ जज की एक ब्याख्या,तथा १ जज की अलग ब्याख्या रहती है.जब कि सर्व बिदित है कि यहाँ मुख्य सचिव का मत,अर्थ,ब्याख्या वीटो का प्रभाव रखता है. प्रशासक के अहंकारी ब्यक्तित्व और कृतित्व कम्पूटराइजेशन की दशा व दिशा दोनों की दुर्गति कर रहें है. इन अफसरों में एक भय ब्याप्त है कि अगर सब कम्पूटर ही करने लगेगा तो फिर हमें कौन पूछेगा. अगर इसमें रोड़ा अटकाना  या सहीं ढंग से नहीं चलने देना है,तो अनेक बहाने हैं .कमेटी ,अध्ययन दल,मीटिंग,कार्यशाला,इत्यादि तो है ही,सबसे अंत में वित्त-बिभाग का हैमर है जो इसको धन की कमी  का हौव्वा खडा कर नहीं चलने देगा.

यह निम्न रिपोर्ट से भी सिद्ध होता है.

Report of the Committee on State Agerian Relations and the Unfinished task in land Reforms –DoLR—
Findings indicate that about 7,50,000 acres of land has been transferred for mining and another 250,000 acres for industrial purposes during last 2 decades [Center for Science and Environment].  There have been regular reports of extensive displacement of poor peasantry under SEZs.  Widespread conversion of agriculture land for non-agricultural purposes is being observed throughout the country. The major drivers of such rampant conversion are decreasing incentives from agriculture, increasing pressure of industrialization and urbanization, and changing aspirations of the people.
:१२----Thus, it is very important that every State clearly demarcates land to be used for different purposes. Revitalization of Land Reforms Council at the Centre and Land Policy Boards for every State is an urgent need to more toward clear land use policy. In fact, it would be really worthwhile to have a Standing Land Commission for every State in the country.
16.    GOVERNANCE AND LAND REFORMS
16.1 Schedule-I of the EIA notification, 2006 issued by the MoEF under item 7-C covers industrial estate/parks/complexes/areas/Export Promotion Zones/ Special Tourism Zones/ Biotech Parks/ Leather Complexes. The above categories continue to be exempted from the requirement of a public consultation even in the new notification. That needs to be brought under urgent amendment in concerned laws and policies.
16.2 Scrap Special Economic Zone Act (2005) under purviews of environmental and ecological concerns.  Single window clearance feature makes the Approval Committee at the State level under the District Collector responsible for approval of all SEZ units and even compliance to conditions of approval if any are to be mentioned by the Assistant Collector. There is no mention of the role of the Pollution Control Board. There is no mention of Coastal Regulation related provisions in the SEZ Act and rules. However, the amendment to the CRZ Notification 1991, have allowed for SEZs to be located in ecologically sensitive coastal areas and ‘no development zones’ that need to be brought under strict regulatory authority adequately represented by project affected community and local representatives.
16.5 All medium to large-scale transfer of land from agricultural to non-agricultural use should be subject to an environmental protection clause, and its strict implementation.
16.6 There should be a regulatory authority at district level for monitoring the land, forest and water issues emerged after set up of mining, industry and/or any development projects.
 16.7           There should be fast track courts for settling of the grievances registered during EIA public hearing.
 17.4 The Collector should be divested of his direct court and revenue functions as he is too busy with other works and should just exercise supervisory functions
7.7    Computerisation of land records should be completed in a specified timeframe.  Land data should include comprehensive information about the parcel of land such as Khata and Khesra numbers, registration details, possession, land type, land use, productivity, tenancy, etc.
 1.1.1          The Government of India constituted in January, 2008, a National Council for Land Reforms comprising eminent people drawn from different walks of life and with the Prime Minister as the Chairman.  Simultaneously, a Committee on State Agrarian Relations and the Unfinished Task in Land Reforms was also constituted. The Committee was divided into seven sub-groups and each focused on an important dimension of land reforms.                     Diversion of Forest Lands
4.3.1 What alarms the Committee most is that approximately 4.3 million forest lands has been diverted to non-forestry use (1952-1976). Till 1976 forests was in the State list and the State Governments were responsible for the management of forests. In 1976 the Government of India issued guidelines providing for mandatory consultation in respect of diversion of more than 10 hectares of land. It is indeed alarming to note that during this period up to 2008, 7.76 MH of land have been diverted out of the forest corpus. Total 55 per cent of this diversion has taken place after 2001. In Chattishgarh the diversion is for many purposes, but mining being one of the important ones. In Chattishgarh, 1.71 Lakh hectares were diverted (1980-2003) of which 67.22 per cent was for mining
The Colonial Nature of the Land Management system which persists needs to be drastically changed.
6.1    Modernization of Land Management
6.1.1 The Committee starts by taking cognizance of the failure of the reformist land agenda as detailed by other Committees to arrive at the conclusion that all distortions in land relations are the product of our antiquated Land Management System. The Land Records comprise the base of the Management System. A weak base would not permit any firm superstructure. The records-of-rights in India reflect — (i) ownership rights, (ii) homestead rights, (iii) right of vested land assignees (patta right), (iv) dakhalkar right, (v) share croppers’ right, (vi) lease right, (vii) hold over right, (viii) right regarding forcible possession, (ix) permissive possession right. The first 6 rights are regulated by various State enactments, whereas the seventh is a phenomenon of the Transfer of Property Act and last two rights are regulated by the Indian Limitation Act. More importantly land records and cadastral maps show easement right for roads/paths, irrigation, bathing and other domestic work, sports and games, worshipping in the temples/mosques, burning ghat/grave yard, tending cattle, etc. In the Permanently Settled Areas the records were updated with every new settlement. However, after Independence the records have fallen into arrears and do not reflect the ground realities with the consequence that they are no longer custodians of peoples’ right but rather an instrument of their exploitation.  The Committee feels that there must grow a national consensus for maintenance of Land Records followed by application of resources.
6.2           Diversity in Record System

6.2.1 The Committee takes a note of diversities in the Land Record System. P S Appu Committee on Revitalization of Land Revenue Administration had suggested a standardized record format, which has not been adopted at the national level. The Committee also notes the increasing pressure on Land Management as the competing demands multiply. 
 जमीन का क़ानून बनाना राज्य का बिषय है.संविधान की ७वीं  अनुसूची की सूची २ क्र० स० ४५  
  १९८७-८८ से यह महत्वाकांक्षी योजना शुरू की गयी.इसका नामकरण हुआ- SRA & ULR अर्थात Strengthening of Revenue Administration and Updating of Land Records.२००८-०९ में २१-०८-०८  दोनों को एक करके नाम दिया गया- NLRMP National Land Records Management Programme.कमेटी ,अध्ययन दल,मीटिंग,कार्यशाला,इत्यादि का दौर चलता रहा.जनवरी २०१० में अध्ययन दल आस्ट्रेलिया गया. An official delegation from the Department of Land Resources (DoLR), Ministry of Rural Development, Government of India, led by Mrs. Rita Sinha, Secretary, DoLR, visited Australia from 10th to 15th January, 2010.  members of the delegation were Dr. A.K. Singh, Director, DoLR and Dr. Preetam B. Yashvant, Settlement Commissioner, Government of Rajasthan.  The delegation visited New South Wales and Queensland to study the property titling system as it operates in Australia.उल्लेखनीय है कि DoLR को भारत सरकार ने इस कार्य हेतु  नोडल एजेंसी बनाया है.
   ५ दिन में जिस तरह  का अध्ययन व रिपोर्ट बननी  थी ,वह बनाकर पेश कर दी गयी.उस रिपोर्ट से जाहिर हुआ कि जब तक एक सर्वमान्य आंकड़ा सुनिश्चित नहीं होगा तब तक कम्पूटराइजेशन का काम ठीक नहीं होगा,तथा इसमें लैण्ड रजिस्ट्री बिभाग को भी जोड़ना होगा. सतत उच्चीकरण हेतु यह आवश्यक है.सर्वमान्य आंकड़ा हेतु जनगणना बिभाग के आकडे लिए गए,जो कि चुनाव आयोग द्वारा प्रयोग में लाये जा रहे थे.
  फिर शुरू हुआ कमेटी ,अध्ययन दल,मीटिंग,कार्यशाला,इत्यादि का दौर. यह मैं नहीं कह रहा हूँ -
 Computerisation of Land Records
THIRTY-THIRD REPORT
LOK SABHA SECRETARIAT
NEW DELHI
August, 2012/Bhardrapada, 1934 (Saka) http://goo.gl/4TYiZ
में यह कहा गया है.
इस रिपोर्ट में यह भी लिखा है कि लगभग १००० करोड़ खर्च करने के बाद भी कम्पूटराइजेशन का काम ठीक नहीं है.केवल राजस्व बिभाग को मजबूत करने का काम किया गया है .

हर दिन यहां (रजिस्ट्री दफ्तर )से सरकारी खजाने में लाखों का राजस्व जाता है। फिर भी एक साल से यहां नया कम्प्यूटर नहीं लग सका। बाबा आदम के जमाने के कम्प्यूटरों के कारण हर दिन यहां आने वालों को परेशानियों का सामना करना पड़ता है। लेकिन कम्प्यूटर सालों  साल तक डिब्बों में बंद रहे। पिछले दिनों इन कम्प्यूटरों को लगाने की कार्रवाई शुरू हुई। कम्प्यूटर डिब्बों से निकाल कर लगा दिये गये। नया सर्वर भी आ गया, लेकिन अब साफ्टवेयर नहीं मिल रहा है। जानकार बताते हैं कि एनआईसी की टीम साफ्टवेयर के लिए दिल्ली गई हुई है। विशेषज्ञों ने पुराने सभी कम्प्यूटरों को कंडम करार दिया है। अधिकारियों की स्थिति ढाक के तीन पात वाली हो गई है उन्हें इस बात का संतोष दिलाया जा रहा है कि  कम्प्यूटर पर तेजी से काम होगा। विशेषज्ञ बताते हैं कि कम्प्यूटर इतने पुराने हो चले हैं कि अब इनका पार्ट- पुर्जा भी बाजार में नहीं मिलता है। ऐसे में इनका अब कोई इस्तेमाल नहीं हो सकता है। नये सर्वर पर पुराने कम्प्यूटर चलेंगे भी नहीं। अब अधिकारियों के पास इन कंडम कम्प्यूटरों को केवल देखने व मैनुअल काम करने  के अतिरिक्त कोई उपाय नहीं रह गया है।

   आंकड़े और हकीकत के नमूने के तौर पर ३ निम्न उदाहरण हैं.मुझे पूर्ण  आशा है कि अपनी क्षमता के बल पर कम्पूटराइजेशन का कार्य अवश्य पूरा होगा.

1

www.irctc.co.in 

http://goo.gl/CfK6C

E-ticketing site books around 48% of the total reserved tickets.

 “The initial two hours of tatkal booking, from 10am to noon, bears the maximum rush and the system books around 40,000 tickets per hour during this period. This is likely to go up to 60,000 to 63,000 tickets per hour,” said a senior IRCTC official.

Railway minister Pawan Bansal has also announced a revamping of the IRCTC website by increasing the booking rate to 7,200 tickets per minute from 2,000 tickets per minute. He also declared that the site would be able to handle 1.2 lakh users at any point of time as compared to its existing capacity of 40,000 users.

“This is expected to be ready by the year-end. IRCTC has already started working on this augmentation and is investing a large sum of money to install future generation hardware and develop improved software,” said the official

Woman can finally get apartment after municipal authority takes 22 years to get her name right

2
A goof-up by the Delhi Development Authority in spelling the woman's name in a letter led to cancellation of the flat allotted to her in 1991.
What's in a name? 
Ask 53-year-old Hony Monga, who almost lost her way in the labyrinthine corridors of the Delhi Development Authority (DDA) fighting to get possession of the flat her parents had gifted her for her wedding decades ago.
LIG flat was booked in her name by her parents in 1979.

Upon repeated requests, she was informed that her file went missing from 1996. 
Through the RTI, Monga was informed that a flat in Rohini's Sector-15 had been allotted to her in 1991 but in the allotment letter, her name was wrongly mentioned as Jony Monga instead of Hony Monga and hence the letter was not delivered to her. 

What worsened matters was by this time, Monga had married and changed her name to Madhu Arora

Monga will now finally be able to get her dream home, after 22 years, following the Delhi High Court's intervention.
Justice Reva Khetrapal pulled up the agency for its blunder.
3
Rape convict who jumped bail arrested by Kerala police after seven years hiding under false identity- http://goo.gl/l0JPV

A probationary officer at theState Bank of Travancore (SBT) for nine months,  an absconding convict Bitti Mohanty  had assumed a fake identity as Ragav Raj from Andhra Pradesh.
Bitti Mohanty, son of a former director general of police of Orissa, was arrested by the Kerala Police on Friday night, nearly seven years after he jumped parole while serving a prison term for raping a German woman in Rajasthan. 

Before that he was in Andhra Pradesh after coming out of a Rajasthan prison on parole in 2006
.


Wednesday, March 6, 2013

उत्तर प्रदेश में जमीन, जमीन के अधिकार,और कम्पूटराइजेशन


उत्तर प्रदेश में जमीन, जमीन के अधिकार,और कम्पूटराइजेशन
जमीन पर लगान (शुल्क)मुग़ल काल से शुरू हुआ तथा अंग्रेजों ने इसको निर्दयतापूर्वक वसूलना (zamindari, mahalwari and ryotwari systems)जारी रक्खा. लगान के साथ-साथ लैंड एक्विजिशन एक्ट १८९४ लागू कर भूमि को अनेक अन्य  कार्यों में लगाना शुरू किया.खेती की जमीन व जगल से अलग एक सरकारी अथवा सम्मिलित प्रयोग की जमीन.इसे सार्वजनिक जमीन का नाम दिया गया.
जमीन से लगान लेने तथा स्वत्व निर्धारण हेतु अनेक क़ानून बनाए गए. Act 2 of 1901 (the Agra Tenancy Act) , Agra Tenancy Act, Act 3 of 1926,,The United Provinces Tenancy Act, 1939 (United Provinces Act no. XVII of 1939), (as amended by all subsequent Acts including the United Provinces Tenancy (Amendment) Act, V of 1943, the U.P. Tenancy (Amendment) Act III of 1946, the U.P. Tenancy (Amendment) Act, X of 1947 and U.P. Tenancy (Amendmend) [sic] Act, XVI of 1948). Uttar Pradesh The IL P. Consolidation c f Holdings Act 11 1939,Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950
 संबिधान में जमीन (सम्पति) को मौलिक अधिकार में रक्खा गया,लेकिन अनेक सुधार लाने हेतु इसे मौलिक अधिकार की श्रेणी से निकाल दिया गया.अनेक कानूनी अड़चनों को दूर करने के लिए लगभग १३ संशोधन भी किये गए.
 जमीन के लिए क़ानून बनाने व लागू करने की जिम्मेदारी राज्य सरकार को दी गयी.
 जमीन के अधिकार-पत्र के रूप में खेवट,खतौनी और खसरा का चलन था.उसके रख-रखाव व इन्द्राज (एंट्री) करने का अधिकार राजस्व विभाग का था.इसके कर्मचारी  व अधिकारी  कभी भी सही ढंग से  अपने कर्तब्यों का निर्बहन नहीं किये ,आज भी प्रदेश इसका खामियाजा भुगत रहा है.लगभग  ८५ प्रतिशत मुकदमें जमीन सम्बंधित हैं,जो इनकी देन हैं.
Forest Rights Act २००६ में दिए गए अधिकार आज भी राजस्व व जंगल बिभाग के सामंजस्य न रहने के कारण उचित ढंग से लागू नहीं हो पाए है.
  अब कम्प्यूटरीकरण द्वारा इन सब कमियों को दूर करने का प्रयास है.कम्प्यूटर एक मशीन है,अगर सही इनपुट इसे देगे तो परिणाम भी सही होगा.बिभाग अपने वर्चस्व की लड़ाई छोड़ एक आंकड़ा प्रयोग करें.अभी अनेक विभाग अपनी-अपनी राग अलाप रहे थे,जो कम्प्यूटर में संभव नहीं है. आज भी स्वत्व के अधिकार को ROR (Record of Right) कहेंगे कि ROT (Right of Titles),निश्चित नहीं है.अनेक वर्गीकरण कई-कई जगह हैं- स्वत्व के ४ प्रकार जैसे  --1Government, 2-Private, 3-Institution and 4-Others हैं,
-1Government सरकारी जमीन के क्रम संख्या १३ पर जिला पंचायत/जिला परिषद् दिखाया गया है तथा 3-Institution के  क्रम संख्या ९ पर पुनः डिस्ट्रिक्ट बोर्ड अंकित है.

           सामान्य प्रचलित शब्द जो जमीन से सम्बंधित हैं.
Khewat ----पुखतेदारान या भूमिघरों की चौसाला खेवट

'IndividualHolding, JointHolding , ‘InstitutionalHolding
In case the land of khasra is such that it is possible to cultivate it either through man-made irrigation sources or through rainwater then land type is known as 'Mazrua' otherwise it is known as 'Gair-Mazrua'.
Under the 'Gair-Mazrua' land classification one term is usually referred to, as 'Gair-Mumkin' which specifies that anything constructed on it, is impossible to shift. For example, if a house is constructed on a piece of land, then the classification of that Khasra will be 'Gair-Mumkin Makan' as it is impossible to shift the same house somewhere else.
For detailed ---see   <<<<http://jkfcr.nic.in/terminolgy.html>>>>>>


Saturday, March 2, 2013

Cement Factories- Dalla, Chunar, and Churk-facts and findings



Cement Factories- Dalla, Chunar, and Churk-facts and findings
The UP State Cement Corporation Ltd was incorporated in 1972 and had its production units at three places—Dalla, Chunar, and Churk—in District Mirzapur in UP. It had an installed capacity of 1.680 million tonnes of cement.

U.P.Govvernment in (1989-91) had advertised for the privatisation of four PSUs in the state, the cement unit being one of them.

However, resistance by workers led to a firing at Dalla in 1991, leading to deaths

Government after initial resistance cancelled the deal with Sanjay Dalmia over the sale of the unit. But the unit after one year went into losses and in three years, the losses mounted to such an extent that it had to be closed down.

The floor price for auction has been kept at Rs 271 crore, which is Rs 40 crore higher than the price at which the previous deal between the UP government and Grasim was concluded. Deal between Grasim and the UP government was opposed by Lafarge.

And that deal was annulled by the Allahabad High Court on the grounds that the state had no authority to sell the assets of the company when it was under liquidation by the orders of the High Court. The latter ruled that the assets be re-auctioned, this time through the formation of an asset sale committee, thus paving the way for the present expression of interest, which is to be followed by bidding.
The order of winding up was passed in the year 1999; the sale of the said assets was approved on the 30th of January, 2006 and the order of confirmation was passed on the 11th of October, 2006. The State Cabinet incidentally decided to abide by the decision given by the Company Court on the day before, i.e., on the 10th of October, 2006 and as such, the State Government has wholly supported purchasers, i.e., Jai Prakash Associates Ltd., namely, JAL.
http://www.religareonline.com/fundamental/report.aspx?ReportType=Chair&CompanyCode=11520073.00&CompanyName=Religare%20Enterprises%20Ltd&MajorSector=1&Ticker=Religare%20+%20En

Jaiprakash Associates Ltd.

(BSE: 532532 | NSE: JPASSOCIATEQ | ISIN: INE455F01025
Chairman Speech
It gives me great pleasure to welcome you all to the 9th Annual General Meeting of Jaiprakash Associates Ltd. (JAL). The Company's accounts for the year ended March 31, 2006, along with the Directors' report, Auditors' report and Management Discussion and Analysis, have already been circulated to you. With your permission, I would like to take them as read.


The company has taken necessary steps to take possession of the assets of UP State Cement Corporation Ltd. (in liq), the sale of assets of which were confirmed in favor of the company by Hon'ble High Court of Judicature at Allahabad on the 11th of October 2006. Revival and modernization are in process to ensure commencement of cement production to its capacity (>2.0 MTPA) between March'07 and March'08
Cases

1----------- Churk Cement Mazdoor Sangh, Churk And Others vs State Of U.P. And Others AIR 1992 All 88

2----------HIGH COURT OF JUDICATURE OF ALLAHABAD
                                 In chamber
MISC. COMPANY APPLICATION NO. 4 OF 1997
        In the matter of
U.P. State Cement Corporation Ltd. ( In Liq.)        
 Hon'ble Sunil Ambwani, J.
3------ Cement Workers Union And Ors. vs Board For Industrial And Financial Reconstruction And Ors. on 8/12/1999
2000 100 CompCas 76 All, (2000) 1 UPLBEC 392
4----- In Re: U.P. Cement Corporation Ltd. (In Liquidation) vs on 14/2/2002
2002 112 CompCas 562 All
5---------HIGH COURT OF JUDICATURE OF ALLAHABAD
CJ's Court
Company Appeal No.1239 of 2006
RPJ Minerals Private Limited and another
Vs.
Shri S.K. Saxena, Official Liquidator, U.P. State Cements Corporation Ltd. & Others  Dt: 27.10.2006
6--------- HIGH COURT OF JUDICATURE AT ALLAHABAD
          Special Appeal No. 1341 of 2007
U.P. Industrial Cooperative Association Ltd.
                        Vs.
Official Liquidator, Attached to Hon'ble High Court of Judicature at Allahabad    Dt/-29.10.2007
 7-------- In Re: U.P. State Cement Corporation Ltd. (In Liq.) vs on 27/4/2007
JUDGMENT
Sunil Ambwani, J.
Churk Cement Mazdoor Sangh, Churk And Others vs State Of U.P. And Others AIR 1992 All 88
                                                  ORDER
1. These writ petitions call in question the validity and legality of the sale by Government of U. P. of 51% shares in a wholly Government owned public sector Corporation, U. P. State Cement Corporation Ltd. (UPSCCL) in favour of Dalmia Industries (Respondent No. 5 in W. P. No. 10607 of 1991).
2. In the State of U. P., there are only three major cement factories, besides a few small units. All the three major units are in the public sector. They are Churk Cement Factory, Dala Cement Factory and Kajaar-hat-Chunar Cement Factory. In 1972, the State Government formed a Government Company known as U. P. State Cement Corporation Ltd. (UPSCCL), which came to own these factories. It appears that two of these factories were started even prior to the incorporation of the Corporation, while the third was installed and commissioned by the Corporation itself.
3. The total installed capacity of the three plants is 25.60 lakhs M. T. per annum. Viewed in terms of their installed capacity, the Corporation is the third largest cement manu-facturer in the country. Its Board of Directors is comprised of 15 directors, of which five are nominated by the Governor, two by the Financial Institutions, and the remaining elected by the Board/share-holders, which again means the State Government. For one or the other reason -- indeed, the reasons appear to be many -- the aclual production has been far below national average of cement factories. According to the company's own publication, production in the year 1985-86, 86-87, 87-88 and 88-89 has been 42.54, 39.45 and 44.92 and..... per cent respectively. According to the Corporation, the wet process employed in the Churk Factory is based upon an absolete technology; plant and machinery have also become worn out due to prolonged use. A modernisation and rehabilitation scheme has been prepared, which is likely to cost Rs. 52.25 crores. Even at the Dala Factory, which employs the dry process, there have been several problems, modernisation and rehabilitation scheme prepared for this plant is expected to cost about rupees 45 crores. (Fortunately, however, the Corporation is not burdened with surplus labour, a common feature of public sector enterprises. According to a publication of the Corporation, the surplus labour is only 364 in the three units put together, which is likely to disappear in the next 4-5 years with the imposition of strict ban on fresh recruitment, now in force). As a result of unusually low production, and for several other reasons, the Corporation has been incurring substantial losses over the last two decades. With every passing year, losses have been mounting.
4. The authorised share capital of the Corporation is Rs. 80 crores, while the subscribed paid-up share capital is Rs. 63.53 crores, entirely contributed by the State. Accumulated losses, according to the counter-affidavit filed by the State Government, over the years 1972-73 to 1988-89 are in the region of Rs. 155 crores by March 31, 1991, it was expected to reach the figure of Rs. 180 crores. In the circumstances, the Corporation was obliged to borrow heavily from Industrial Development Bank of India (about Rs. 5 crores) and the Allahabad (Rs. 5 crores). The Corporation has borrowed substantial amounts from the State Government (more than Rs. 10 crores). According to the counter-affidavit, the outstandings to the Financial Institutions is in the region of Rs. 100 crores (55 crores principal and 46 crores interest).
5. The Corporation employs about seven thousand persons. The three factories are jointly located over an area of 13.5 square kilo metres. On the said land have come up, besides the manufacturing units and the auxiliary buildings, six residential colonies comprising more than 5,000 dwelling units, and six recognised educational institutions. The company owns three lime-stone mines as well, spread over an area of about 30 sq. kms. The Corporation also owns a property in Lucknow known as 'Cement Bhawan'. It has entered into a contract with Bokaro Steels for supply of slag at concessional rates, which has still 20 years to run. These facts alleged in W. P. No. 10607 of 1991 are not disputed in the counter-affidavit filed by the State. The petitioners have further alleged that the total value of these assets including the limestone mines and Bokaro contract is Rs. 700 crores. The respondents have denied this valuation, but have not chosen to give their own valuation.
Part II : 6. In view of the continuing losses incurred by the Corporation, the Government appears to have been thinking of ways to cut these losses. Various alternatives were explored, including the sale of units and joint-venture. Ultimately, it was decided to convert the said Corporation into a joint sector Corporation. It would be appropriate to notice the course of events leading to the agreement in question between the State Government and the Dalmia Industries (respondent No. 5), whereunder the State has agreed to sell 51% of the stock at the rate of Rs. 75/- per share, at the same time extending certain concessions and accommodations. These facts are drawn from the records placed before us by the counsel for respondents in pursuance to our direction.
7. In the Economic Times dated 1-5-1990, an advertisement (occupying a space of 5" x 4") was published by the State Government of U. P. stating that the State Government had decided to privatise the U. P. State Cement Corporation Ltd. and that the desirous and reputed entrepreneurs may come for briefing on 19-5-1990 at 11 a.m. It was published in the name of D. K. Mittal, Special Secretary to Government of U.P., Industries Department. Interested persons were asked to contact the Special Secretary for further details and also for submission of their proposals. This advertisement did not specify whether the Corporation was to be privatised in its entirety or whether a joint venture was proposed to be entered into. All that it said was that the State Government had decided to privatise the said Corporation and that the parties interested may come for briefing on the specified day and time and contact the Special Secretary for further details.
8. On 15th June, 1990, the Hon'ble Chief Minister, white presenting the budget, reaffirmed his Government's faith in the public sector, but at the same time said that in respect of units incurring losses, steps are being taken to redress the situation either by merger, rehabilitation, or by placing them in the joint sector. He said that those units, which cannot be rehabilitated, will be closed. He disclosed that the State Government has, on the basis of a preliminary scrutiny, invited proposals from private entrepreneurs in respect of certain units and that an officer of the rank of Secretary to Government has been deputed to process the matter further.
9. In pursuance of the advertisement dated 1-5-1990, several industrialists responded. On 19-5-1990, a meeting was held in the office of the Principal Secretary, Industries, Government of U. P. According to the minutes of this meeting, as many as 25 entrepreneurs participated in it. The Principal Secretary explained in details the status of the Corporation and gave a detailed note covering all its aspects including the balance-sheet of 1988-89. He informed the participants that the State Government had decided to convert the Corporation into joint-sector by inducting private management, and that it would not make any further investment therein either by way of loan or by way of Government guarantees. He informed them that there ought to be no retrenchment of workers and that it was a pre-condition to any agreement. The entrepreneurs were asked to send their offers based upon the above points and on the further assumption that the reliefs available to sick units as per policy of the State Government and guidelines of the Reserve Bank of India would be made available. Offers were invited before the end of June, 1990. The detailed note supplied to the participants contained several particulars relating to assets, capacity, annual production, finances, debts and so on.
10. By a proceeding dated 27th August, 1990, a committee known as Privatisation Committee was constituted by the Government to negotiate with prospective entrepreneurs in the matter of privatisation of loss-making Government units. It comprised seven members, namely, 1. Principal Secretary, Public Enterprise Department (Chairman), 2. Shri Ram Baijal, Ex-Chairman, IEL Group, Noida, 3. Col. B. K. Rai, Ex-Managing Director, U. P. Electronic Corporation, 4. Secretary of the concerned Administrative Department, 5. a nominee of the Chairman of IDBI,6. a nominee of the State Bank of India and 7. Secretary, Public Enterprise Department. This Committee was to deal with the privatisation of four companies, namely, 1. U.P, State Cement Corporation Ltd., 2. Auto Tractors Ltd., 3. U.P. Tyres and Tubes Ltd. and 4. U.P. Instruments Ltd.
11. The first meeting of the Privatisation Committee took place on 11-9-1990 where it deliberated upon the various aspects of the job entrusted to it. One of the important matters discussed at this meeting was 'valuation' of the units (subject 3). One of the members Sri A. K. Puri expressed the opinion that it is essential to have all the units valued properly by reputed approved valuers. It was necessary, in his view, to find the main assets and investments in each of the units (vide page 3 of Annexure V11I in the Material Paper Book supplied by the Government). Sri Puri also suggested names of five approved valuers for this purpose, namely, 1. A. F. Ferguson & Co., New Delhi, 2. P. N. S. Advisory Service, New Delhi, 3. Price Water-house Associates, New Delhi, 4. Ray & Ray, New Delhi and 5. S.R. Botliboi & Co., Bombay. The Committee decided that a sub-committee of four members including Sri Puri will decide upon the agency through which the units shall be got valued. It is significant to notice that in spite of this decision, the unit in question (UPSCCL) was not got valued by any of the aforementioned valuers/agencies.
12. It is not necessary to refer to the proceedings of the second meeting of the Privatisation Committee (PC), since nothing significant was transacted thereat. Meanwhile, negotiations were being held with the Associated Cement Companies (ACC). The said company requested the PC to have an immediate valuation of the U PSCCL carried out by a reputed firm of chartered accountants to determine a realistic basis for negotiations. They suggested the name of M/s. S. B. Billimoria & Co., Bombay, for the purpose (vide letter of ACC dated 20-9-1990 in the Material Paper Book supplied by the Slate Government). Accordingly, the Government of U.P. asked Billimoria & Co. to undertake the job. Parameters of the study were indicated in the letter of the Government dated 10-10-1990 addressed to the said firm of chartered accountants. (A copy of the letter has, however, not been made available to us). The cost of the said study was to be shared by the Government and the ACC in equal proportion. The said firm carried out a study and submitted its report, comprised in two volumes, on 10-10-1990. They valued the shares of the Corporation at Rs. 20/- each. (The face value of the shares is Rs. 100/-each). After receiving the said report, ACC wrote to the Government on 12-11-1990, indicating the main features of their offer, on the basis of which they were prepared to enter into a joint sector agreement. Certain negotiations appear to have laken place in pursuance thereof between the PC/Government and the ACC. We have not been apprised of the particulars of these negotiations, particularly of the discussions which are said to have taken place on 21st and 22nd November, 1990 at Lucknow. What is relevant is that on 28th December, 1990, ACC wrote to the Government indicating their disinterest in the matter. The relevant paragraph of that letter reads thus :--
"I write further to my letter dated 12th November, 1990 and the subsequent discussions my colleague Mr. I.M.M. Mabiar and I had with you and the Privatisation Committee on 21st and 22nd December, 1990 at Lucknow.
In the light of our discussions, the matter was further considered by us along with Senior Directors of the company. Having regard to the large accumulated losses and recurring burden of excessive work force, it was felt that it will not be possible for the ACC to restructure UPSCCL and run it on a viable basis within the broad parameters of privatisation indicated by you and your colleagues during the discussions. We, therefore, deeply regret our inability to take any further interest in the proposal."
13. In December, 1990, an offer was received from the Raymond Woollen Mills. They were interesled in an outright purchase of all the assets. They were not prepared to take over any of the liabilities. This offer was given no serious consideration by the PC. The Orient Paper Mills, who had earlier made an offer, expressed their inability to enter into a joint venture. The net result was that by the end of the year, only the Dalmia Industries (R-5) remained in the field. Their offer was considered by the PC at its meeting held on 11-1-1991. We think it relevant to refer to the minutes of this meeting at some length.
Indeed, it would be appropriate to extract the entire minutes relating to the UPSCCL, considered as item 2.
(MINUTES)
"Item No. 2.
Outlining the details given in item 2 of the agenda notes, Chairman elaborated as to how the Sub-Committee started the negotiations with the parties concerned with just two stipulations from the State Government side and how during the discussions a pattern for collaboration emerged. He also informed that the contents of Billimoria's valuation report was made available to other parties also in the final round of discussions.
Members agreed that there is an immediate need for privatisation since Government will be avoiding the substantial cash tosses incurred year after year and Government will also stand to benefit through increased tax inflows as the capacity utilisation improves under private sector management.
Members then discussed the parameters that had emerged during the negotiations by the sub-committee and approved them as under :--
1. UPSCCL will be handed over to the joint sector promoter on an 'as is where is' basis with all the assets and liabilities.
2. The joint sector arrangement will be Govt : Private Promoter--49 : 51.
At the time of any future disinvestment by the Government, they will give the first offer of the shares to the promoter on a mutually agreed price to be decided at that time.
3. While Government might need an initial payment at the time of signing of the MOU, balance payments wilt have to be paid in instalments as per an agreed time schedule. The promoter will have to provide sufficient and satisfactory guarantee for this balance amount. The promoter will also pay interest on this amount from the day of the agreement at a mutually agreed rate of interest to be paid in half yearly instalments.
4. The promoter will bring in funds re- quired for the short term and long term investments in the corporation according to a pre-determined investment plan.
5. The promoter will take over the labour on an 'as is where is' basis and after taking over the management will decide on the future course of action.
6. State Government will be requested to make available the ST. deferment concession. They would also be requested to consider deferring the payment of liabilities due to the State Government and its agencies.
7. As regards concessions from financial Institutions and Banks, State Government will assist the promoter in his negotiations to get these as are available to sick units that are being revived.
8. Representation on the Board will be in the same ratio of share holding. The Chairman will be nominated by the State Government and full time Managing Director by the promoter.
U.P. Asbestos had not given any firm offer. Thus there were only two sealed offers received from M/s. ACC and M/s. Dalmia regarding the price of the shares at which they are willing to come in as joint sector partners. These two covers were opened at the meeting.
It was found that M/ s. ACC had expressed their regrets about their inability to take any further interest in the proposal. The other offer of M/s. Dalmia was, therefore, the only one to be considered.
M/s. Dalmia Industries Ltd. have offered for a share having face valued Rs. 100/-.
Rs. 45/- With no benefits available from financial institutions. Rs. 72/- With all the benefits like
i) reduction of rate of interest
ii) writing off penal and compound interest on the term loan iii) Converting the interest due into interest free loan. Rs. 100/- If along with the benefits from
the financial institutions, State
Govt. also write off the entire
amount of contingent liabilities
as on date of take over.
The Committee felt that the offer contained a number of conditionalities and desired a firm offer. What concessions will be available from the financial institutions will only be known after the joint sector venture comes into existence and discussions are held by the private promoter with the financial institutions.
Sri Pravin Kumar who represented M/s. Dalmia Industries was called before the committee. The members wanted to know from him the details of the investment plan and turn around strategy, the general details about the Dalmia group, its annual cash generating capacity, etc.
Sri Pravin Kumar explained his groups operations. He said the current annual turnover was around Rs. 600 crores which is expected to increase to Rs. 1000 crores. He agreed to send a 2 page brief about the Dalmia group.
As regards the turn around strategy, he stated that they would be concentrating on the Dalla units, make them operate at 80-85% capacity utilisation, to generate revenue surplus. They would be taking up a rehabilitation plan for Churk only later. As regards surplus labour he was of the opinion that to have industrial peace, they may not like to attempt any reduction in the first year and may plan rationalisation only later. For the short term investments of 10-15 crores required, they would be depending on internal resources of the group and will be approaching the financial Institutions only for the modernisation programme which would need around Rs. 120 crores.
As regards guarantees, Sri Pravin Kumar agreed to provide corporate guarantee from the Dalmia Industries as also from the other group companies which will be investing in UPSCCL.
Sri Pravin Kumar was informed that the following concessions could be recommended to the State Government for consideration :--
i) Sales tax deferment for 5 years as per the approved scheme.
ii) Rescheduling of about Rs. 25 crores payable to different State Government departments. The payment schedule will be a moratorium period of 3 years followed by payment in 5 equal annual instalments.
The interest payment for these rescheduled liabilities will be 12% p.a. with a rebate of 3% for timely and prompt payments. There will be no moratorium on interest payment -- that is -- interest is payable on the outstanding amount from the date of the agreement.
iii) Among the contingent liabilities, Rs. 140 lakhs towards sales tax cases and Rs. 11 lakhs towards stamp duty may be considered for write off. All other contingent liabilities will be the responsibility of the promoter. Efforts will also be made to drop the pending sales tax cases.
Given these concessions which could be reasonably expected to be granted by the State Government Sri Pravin Kumar was expected to give a firm price. The committee also informed him that no commitment can be made on behalf of Financial Institutions and Banks regarding the concessions that would be available.
He should while arriving at the price make whatever assumptions he would like to make regarding the usual concessions that would generally be available to a sick unit.
Sri Pravin Kumar finally offered a price of Rs. 75/- per share. The members felt that this was a very fair offer and should be recommended to the Government.
The Committee, therefore, decided to recommend that the offer of M/s. Dalmia Industries be accepted. The committee authorised the Sub-Committee to prepare a draft MOU on the terms and conditions indicated above and the final recommendations to the Government."
14. On 19-1-1991, the Chairman of the PC wrote to the Chief Secretary to Government of U.P. that terms of joint venture have been settled with Dalmias and that the IDBI has also welcomed the proposals. He referred to the proceedings of the PC dated 11-1-1991 wherein the Deputy General Manager of the IDBI participated. It was said that the said Deputy General Manager apprised Sri Nadkarni, Chairman of the IDBI, of the proposals on telephone and that Sri Nadkarni welcomed the same. The letter further states that Sri Nadkarni also verified the financial status of Dalmia Industries and said that there was nothing against them.
15. A memo of understanding (MOU) was finalised and signed by both the parties, i.e., the State Government and the Dalmia Industries. (The MOU does not bear the date on which it was signed nor could the Counsel for the State furnish us the date. It, however, appears that it was executed sometime in January/February, 1991). It would be appropriate to set out the MOU in full :
(MOU)
"M.O.U. between the Industries Department, U.P. State Govt. and M/s. Daimia Industries Ltd.
The Government of U.P. and M/s. Dalmia Industries Ltd. have agreed to enter into Joint Sector Agreement in respect of U.P. State Cement Corporation Ltd.
1. Dalmias will take over the management of UPSCCL taking over all the asseis 'as is where is' basis.
2. The Joint Sector Agreement will be U.P. State Government : Dalmias 49 : 51.
3. The shares with a face value of Rs. 100/-at present will be disinvested by the State Government to Dalmias at a price of Rs. 75/-per share.
4. Dalmias will pay to the Government on entering into an agreement an amount of Rs. five crores as per the following schedules :
At the times of signing Rs. One crore.
the agreement.
After three months of Rs. Two crores.
signing the agreement.
After six months of Rs. Two crores.
signing the agreement.
The later two payments will also be made at the beginning itself by post dated cheques.
5. Balance amount shall be paid within Twenty Four months from the date of this M.O.U. This balance amount will carry an interest of 12% p.a. from the date of the agreement till the date it is paid to the State Government.
6. This balance amount mentioned in para 5 above as and when it is paid by the Dalmias will be reinvested by the State Government as secured loans or against secured debentures into UPSCCL and these loans will carry the same rate of interests of 12% p.a. These loans debentures are repayable after a period of five years in four equal annual instalments.
7. Whenever the State Government decides to disinvest its remaining shares, Dalmias will be given the first right to purchase the same at a mutually agreed price to be fixed at that time.
8. Immediately on entering into an agreement with the State Government, Dalmias will furnish a Corporate guarantee and also guarantees from the other companies of the group who will be investing the UPSCCL for the balance amount mentioned in para 6 above.
9. All the employees of UPSCCL will be taken over on an 'as is where is' basis by the Joint Sector venture.
10. Representation on the Board of Directors will be in the same ratio as the share holding. State Government will have four Directors and Dalmias five Directors. The Chairman will be nominated by the State Government out of the four Directors and the full time Managing Director by the Dalmias out of the five Directors.
11. The capital basis of the Corporation will not be changed without the prior consultation and agreement of the U.P. State Government.
12. Dalmias hereby give an undertaking that they will run UPSCCL as a cement manufacturing unit at least for a minimum period of five years.
13. If Dalmias are not able to meet any of the commitments given to the State Govern ment at the time of the formation of the Joint Venture, in addition to the stipulation that the internal and external auditors shall be ap pointed in consultation with the State Gov ernment, the State Government will be at liberty to take over the management of the Company.
14. Other than what has been stated above, there will be no further inflow of funds to UPSCCL, in future from the Government.
15. State Government will not give any guarantee for any funds to be raised in future by the Management of UPSCCL.
16. After the Joint Sector Venture comes into existence, on application UPSCCL may be granted the following concessions :
i) Sales Tax deferment facility for five years.
ii) Rescheduling the liabilities due to the State Government and its agencies to the tune of Rs. Twenty Five Crores the payment schedule will be a moratorium period of three years followed by payments in five equal annual instalments.
The interest payment for these rescheduled liabilities will be 12% p.a. with a rebate of 3% for timely and prompt payments. There will be no moratorium for interest payment that is interest is payable on the outstanding amount from the date of agreement.
iii) Contingent liabilities of Rs. 1.4 crores to the Sales Tax Deptt., and Rs. 11 Lakhs towards stamp duty shall be waived. Further the Sales Tax Depatment will be requested to drop all past cases.
16. All other contingent liabilities other than what has been mentioned in item 15 above shall be payable by UPSCCL if and when they materialise.
17. The memorandum of articles of association will have to be suitably amended to reflect the changed version of the company and other changes envisaged in the Board etc."
The terms of the MOU were also incorporated in a G.O. issued by the Government on 13 / 23rd February, 1991, and another G.O. issued on 23rd February, 1991.
16. Another meetp1 ing of the PC was convened on 4-3-1991, but the meeting could not go on because of a forged stay order produced before the Committee. As to who was responsible for and who produced this forged order, we shall discuss elsewhere. At this stage, it is sufficient to notice that the meeting could not take place. When it was discovered that the order produced before the meeting was a forged one, another urgent meeting was called on 7th March, 1991, telephonicaliy, and it was held on that day. At this meeting, it was resolved to transfer 49 per cent of the shares in the UPSCCL in favour of the Dalmia Industries and their nominees, and for this purpose, a share Transfer Committee was constituted. It may be mentioned here that the decision to transfer only 49 per cent shares, and not 51 per cent shares as per the MOU, was taken in view of the stay order dated 16-10-1990 passed by this Court, to which we shall refer presently. Another step taken at this meeting was to accept the resignation of certain directors from the Board of Directors of the UPSCCL and induction of four Directors who were the nominees of the Dalmia Industries.
Part III : 17. W.P. No. 26223 of 1990 was filed on 16-10-1990 by several trade unions and employees' unions. It is evident that by the said date (16-10-1990), nothing concrete had emerged. The writ petition was based upon the apprehension that the Corporation was being privatised, which would affect the service conditions and the very continuance in service of the workers and employees. The prayer in the writ petition was to call for the records relating to the decision of the Government to privatise the UPSCCL and to quash the said decision. It was also prayed that the services of the employees, workers and officers of the Corporation should be continued as of date. It came up before a learned single Judge on 16-10-1990 and the following order was passed on the stay application :--
"Learned counsel for the petitioners has stated that the State Government has taken a decision to privatise the U.P. Cement Corporation and necessary steps are being taken to implement the aforesaid decision.
Until further orders, the final implementation of the decision to hand over the factories, run by the Corporation, shall remain stayed during pendency of the writ petition. However, in the meantime, other formalities may be completed (Sd. S. C. Verma J.)"
18. On 13-3-1991, the Churk Cement Adhikari Kalyan Samiti filed the second writ petition at Lucknow, numbered as W.P. No. 1003 of 1991. By this date, the agreement between the Government and the Datmia Industries had been arrived at and the transaction practically finalised. The petitioners themselves filed a copy of the MOU and the GOs aforementioned and questioned the same on several grounds. The reliefs sought for in this writ petition arc :
(i) quashing the Government orders dated 13/23rd February, 1991 and 23rd February, 1991, respectively;
(ii) quashing the MOU;
and
(iii) ardirestion to the respondent Government to consider the proposals submitted by the employees of the Company for running the Company on the terms incorporated therein.
Certain interim orders were passed in this Writ Petition on 13/3, 15/3, 29/3 and again on 9-4-1991. It is not necessary to refer to them in any detail. Suffice it to say that the interim order passed on 15-3-1991 was vacated on 9-4-1991 and the writ petition was directed to be heard along with the other writ petition filed at Allahabad. The said writ petition was accordingly transferred to Allahabad and renumbered as W.P. No. 10607 of 1991. The following are the averments in this writ petition :
19. The U.P. State Cement Corporation Ltd. is a Stale within the meaning of Art. 12 of the Constitution. It is a Government company and all its shares are held by the State Government. It was incorporated in 1972. The Government exercises far-reaching control over the company. It owns three cement factories, which are located over an area of 13.5 sq kms. In the said area are located the manufacturing units and their auxiliary buildings, six residential colonies comprising five thousand dwelling units, six recognised educational institutions and three lime-stone mines. The value of the land is more than Rs. 100 crores at the rate of Rs. 100/- per square yard. The cost of the residential building's is rupees 55 crores. The lime-stone mines yield, on an average, two lakhs of metric tons per month. There are roads, railways, tracks, electrical installations within the said area. The Corporation also owns a property known as 'Cement Bhawan' at Ashok Marg in Lucknow. The cash in bank account is in the sum of Rs. 8.82, crores, which is supported by the note dated 25-2-1991 prepared by the Accounts Officer of the Company. The company has also a subsisting contract with Bokaro Steels for supply of slag at a rate less than 1/3rd of the current market rate. This contract has still to run for 20 years. This is a great advantage. The installed capacity of the three Cement Factories is 25.60 M.T. of cement per annum. The cost of installation of a cement plant is Rs. 2000 per metric ton, which would mean that cost of setting up a cement plant of that capacity would be more than Rs. 500/- crores. The existing inventory of the Corporation is valued at Rs. 25 crores. Eighty per cent of the cement produced by the Company is sold to the State Government Departments and only 20 per cent to public. Sale to Government is at a lesser rate than the market rate. The installed capacity of the three cement factories is equal to 50 per cent of the annual consumption of cement in the State. Corpora- tion is paying Excise duty in sum of Rs. 2l crores annually and a sum of Rs. 1.25 crores towards royalty and Welfare Cess to State Government. It also pays Rs. nine crores as Sales Tax every year. On 1-5-1990, the Government published an advertisement in the Economic Times, indicating its intention to privatise the Corporation and inviting offers. The employees of the Company have also submitted a proposal (a copy of which is Annexure 8 to the writ petition), which has been neither considered nor any orders passed thereon by the Government. While so, on 13/23rd February, 1991, the Government issued a G.O. stating that a decision had been arrived at to sell 51% of shares in the said Corporation in favour of Dalmia Industries (R-5). Another G.O. has also been issued on 23-2-1991. A memo of understanding is also said to have been executed between the Government and the Dalmia Industries in pursuance of the said proceedings. Five persons nominated by the Dalmias are going to be appointed to the Board of Directors of the Company. Shares are also going to be transferred to the said party. The said MOU, G.P. and the agreement are all illegal inasmuch as the State Government had at no point of time issued any advertisement or public notice notifying its decision to run the Corporation as a joint sector company nor were any offers invited on that basis. All the terms and conditions have been finalised only after choosing the transferee and in private negotiations with them. The procedure adopted is neither proper nor fair and is violative of Art. 14 of the Constitution. Valuable public property Worth several hundreds of crores is gifted away in favour of Dalmia Industries (R-5) for a token payment of Rs. One crorc. Besides the low price, several attractive concessions and incentives are also extended to the said respondent. The entire transaction is vitiated by secrecy and is prejudicial to public interest. The transaction is contrary to the provisions of S. 30-B of the Monopolies and Restrictive Trade Practices Act, 1969. It is also contrary to the agreements the Corporation has entered into with the Financial Agencies namely IDBI, SBI and Allahabad Bank, whereunder the Corpora- tion has undertaken not to transfer any of its shares except with the prior approval of IDBI. No such prior approval has been obtained. There has been no proper valuation of the shares or properties of the Company. The transaction is prejudicial to the public interest and unconstitutional and has been arrived at in a clandestine manner.
20. On behalf of the respondents, a counter-affidavit has been filed on behalf of the Government of U.P. (R-1), which has been adopted and affirmed by respondents 2 to 4 (UPSCCL and its officers) and the Dalmia Industries (R-5). We shall, therefore, refer to the contents of the counter-affidavit filed by 1st respondent.
The petitioner has no locus standi to maintain the present writ petition. The employees of the Corporation are not Government employees and do not have the protection of Art. 311 of the Constitution. They have no right to challenge the policy decision of the Government to privatise the Corporation or to enter into a joint sector agreement. The rights and privileges of the workers of the Corporation are not affected in any manner by the agreement entered into between the Government and the 5th respondent. The fifth respondent has agreed to take the employees of the Corporation on 'as is where is' basis. The petitioner has suppressed material facts, on which ground alone the writ petition is liable to be thrown out. In W.P. No. 26223 of 1990, the petitioner (in W.P. No. 10607 of 1991) filed an application to implead itself on 25th February, 1991. Though the said application was heard on 4th March, 1991 by a learned single Judge of this Court, no orders were passed thereon. The said petitioner moved a stay application also, requesting the Court to stop the holding of the meeting of the Board of Directors of the Corporation scheduled to be held on 4-3-1991. No orders were passed thereon. The application has merely adjourned to 29th April, 1991. Having thus failed in their attempt to obtain a stay order from this Court, a forged stay order (purporting to have been passed on 27th February, 1991) was delivered to the Chairman of the Corporation along with a covering letter purported to have been written by the Churk Cement Staff Association. The meeting convened on 4th March, 1991 was adjourned on that account. After discovering that it was a forged order, a meeting of the Board was held on 7th March, 1991. This conduct of the petitioner disentitles to it any relief from this Court; the writ petition must be dismissed on this ground itself.
The decision to convert the corporation into a Joint Sector Corporation was taken after due consideration. It is neither arbitrary nor is open to judicial review. The. installed capacity of the three cement factories owned by the Corporation is, no doubt, 25.6 lakhs M.T. per annum, but it has been regularly and consistently incurring losses from the year 1972-73 except for one year 1982-83. It has never been able to fully utilise its installed capacity. For example, during the years 1987-88 and 1988-89, it could utilise only 44 per cent of its installed capacity. It has further fallen to 32 to 35 per cent in the subsequent year. The Corporation has incurred, losses of Rs. 155 crores til! 31-3-1990. It has been incurring loss of over rupees two crores per month. By 31st March, 1991, the losses are likely to reach the figure of Rs. 180 crores. It has been continuously defaulting in payment of State dues, namely, electricity charges, sales tax, etc. In the year 1990, the Government sanctioned a sum of Rs. 10 crores to enable the Corporation to pay its electricity bills. Even so, electricity dues are mounting. Dues of other financial institutions are also substantial. The principal amount outstanding to them is Rs. 55 crores and interest 46 crores. The entire capital of the Corporation (Rs.68 crores) has been wiped off by the losses. Production has been continuously going down. In these circumstances, decision was taken by the Cabinet in its meeting held on 20th April, 1990 to convert this public sector Corporation into a joint sector Corporation in order to minimise the recurring losses. Accordingly, an advertisement was published in Economic Times on 1st May, 1990. Officers were invited. To process these offers a high level committee, called the Privatisation Committee (PC), was consti- tuted and the offers received were duty scrutinised and processed. The question of valuation was referred to an independent and recognised valuer who determined the value of the shares of the Corporation at Rs. 20/-per share (face value being Rs. 100 per share). Indeed, some parties felt that even this was an over-valuation. After several meetings and discussions, the Dalmia Industries offered to purchase the shares at the rate of Rs. 75/- per share, which was found to be best offer, and accordingly, the deal was finalised with it.
There is no basis for any apprehension in the minds of the workers and employees of the Corporation regarding their service conditions. Cl. 9 of the MOU clearly safeguards their service. Government is not divesting itself totally. Moreover Art. 125(a) of the Articles of Association of the Corporation empowers the Governor to give binding directions. It is a sufficient safeguard. Because of the poor performance of these units, a stage had arrived where it was difficult for the State to run these factories. Government's financial position also does not permit any substantial investment, which may be required for redressing the situation. The proposal submitted by the workmen is not feasible or workable. They have not indicated the guarantee which they can furnish to the Government. It is for this reason that they were not called for discussions.
In view of the orders of this Court dated 16-10-1990, the Government did not transfer 51 per cent of shares, but transferred only 49 per cent shares. The shares have been transferred and duly registered and recorded in the register of members of the Corporation on 19-3-1991. The transaction entered into is a fair and appropriate one, in all the circumstances. The 5th respondent has already paid a sum of rupees two crores and has also furnished security for a sum of Rupees 21 crores to the State Government in terms of the MOU. So far as the concessions said to have been given to the 5th respondent are concerned, they are the normal concessions extended to all sick and loss making units. In any event, these concessions were taken into account while fixing the value of Shares at Rs. 75/- each. It is untrue that under the terms and conditions of the transaction entered into between the Government and the 5th res-r pondent, the latter is getting a benefit of Rs. 770 crores. It is really an exaggerated and unrealistic figure. Even today, the Board of Directors of the Corporation consists of 15 directors of which four would be the nominees of the State Government, five of the Dalmias, two of the Financial Institutions, one of the State Bank of India, and two of the Railways. In other words, Dalmias do not have a majority in the Board of Directors. There is no violation of any of the provisions of M.R.T.P. Act. The nominees of the financial Institutions like IDBI are parties to the agreement and have approved the Came. The properties of the Corporation continue with the Corporation and they are not transferred to the 5th respondent. The writ petition accordingly deserves to be dismissed.
Part IV : 21. Sri S. P. Gupta, learned counsel for the petitioners in both the writ petitions, urged the following contentions :
(1) U.P. State Cement Corporation Ltd. has been established by the State of Uttar Pradesh in discharge of the duty placed upon it by Part IV of the Constitution. Establishment of the Corporation is directly related to Art. 38, Cls. (b) and (c) of Art. 39 and Art. 43A. As held by the Supreme Court in Akadasi Padhan v. State of Orissa, AIR 1963 SC 1047, reaffirmed in Tinsukhia Electric Supply case (1989) 3 SCC 709 : (AIR 1990 SC 123), our Constitution has accepted; and incorporates the doctrinaire approach to socialism as distinguished from rational/ pragmatic approach. Privatisation of public sector companies is a direct negation of the philosophy underlying our Constitution. It is also held by the Supreme Court that nationalisation must be deemed to be in public interest. This is the inference drawn from Cl. (6) of Art. 19. From this, it follows that any act of denationalisation, total or partial, is against public interest. Privatisation of public sector concerns, whether total or partial, is contrary to the Directive principles contained in Part IV in particular, Cls. (b) and (c) of Art. 39. It has again been ruled out by the Supreme Court that any executive act or legislation which runs counter to these directive principles must be deemed to be contrary to public interest. Privatisation is per se unconstitutional and against public interest,
2. Even assuming that privatisation of a loss-making public concern is permissible, the transaction and the agreement arrived at by the State Government with the Dalmia Industries (R-5) is an unreasonable one and contrary to public interest. 51 per cent shares in a public sector Company, worth several hundred crores of rupees, is being made over for a song. What the Government ultimately got is only rupees one crore and, even if the Dalmia Industries pays the subsequent instalments of rupees two crores each, it will only be rupees five crores. The rest is only a promise which amount again is to be deployed back for the purposes of the Corporation, The substantial concessions and facilities extended under the agreement are themselves worth several crores of rupees. The deal smacks of arbitrariness, underhand dealing and a total surrender of public interest to favour a private party. The procedure adopted for and the manner in which the negotiations took place and the agreement arrived at are neither open nor fair. Prior approval of the IDBI was not obtained, as required by the agreement between the Corporation and the Financial Agencies dated 27th February, 1978.
3. The agreement and the understanding in question are violative of S. 30-B of M.R.T.P. Act.
4. The Government acted arbitrarily in not at all considering the offer made by the workers and employees of the Corporation. They were not invited for discussions, while the other entereprencurs were. The reasons given in the counter-affidavit for not considering the worker's offer are totally unsustainable and are not borne out from the record produced by the respondents themselves.
Serious objection was taken by the learned counsel to the State of U.P. and the Dalmia Industries (respondents 1 and 5. respectively in W.P. No. 10607 of 1991) being represented by the same counsel. He submitted that both of them engaging the same Counsel is not only inappropriate but also speaks volumes of the total surrender of public interest by the Slate in favour of, and to promote the interest of a private parly. He made grievance of the fact that a firm of solicitors Khetan & Co. was engaged by the Cement Corporation and the 5th respondent, and a substantial amount of rupees five lakhs was paid from out of the funds of the Cement Corporation by way of fees to the said solicitors.
22. On the other hand, Sri Sudhir Chandra learned counsel appearing for the State of U.P. and the Dalmia Induslries, made the following submissions.
(i) That the first writ petition (W.P. No. 26223 of 1990) was filed by the workers and employees' unions questioning the privatisation move, on the apprehension that any such privatisation would affect their conditions of service adversely and may result in their relrenchment. This apprehension is belied in view of Cl. 9 of the MOU, which expressly provides that "all employees of UPSCCL will be taken over on 'as is where is' basis in the joint sector venture." Indeed, this was one of the preconditions stipulated by the Government before entering into any joint venture agreement. Since all the employees of the Corporation will be continued in service of the Corporation even after it becomes a joint sector venture, there is absolutely no room for any such apprehension on the part of the employees. In view of the said clause in the MOU, the very cause of action for this writ, petition disappears. The employees and workers thus lose whatever locus standi they had for maintaining the first writ petition.
(ii) Writ Petition No. 10607 of 1991 must be thrown out in view of the fraud played by the petitioners, viz., producing a forged order and getting the meeting dated 4-3-1991 adjourned on that basis. Having failed to obtain an order from this Court, they forged and fabricated an order, which conduct by itself disentitles them to any discretionary relief from this Court under Art. 226 of the Constitution.
(iii) the impugned agreement and under-Standing with 5th respondent was not arrived at by the Government in a hurry. It is the culmination of an elaborate and protracted scrutiny and negotiations by a high level body. It has also been blessed and approved by the financial agencies like the IDBI. In the light of the huge losses accumulated by the Corporation and its constantly falling production, its inability to meet its financial and other obligations, and also in view of the anxiety of the State Government to cut its tosses and not to invest any further amounts in the said factories, the deal arrived at is the best one in the circumstances. There has been no secrecy nor any underhand dealing in the matter. The transaction has been only arrived at. In fact, one of the causes for the poor performance of the Corporation is indiscipline among workmen, and, in particular, corruption among the officers of the Corporation. The officers of the Corporation had been siphoning off the properties and products of the Corporation. They have thus developed a vested interest in the public sector management. They are afraid that if the 5th respondent takes over the management, they would not be allowed to indulge in these corrupt activities. That is the real reason why they have come forward with the present writ peiitions.
(iv) In matters of this nature, this Court, while exercising jurisdiction under Art. 226 of the Constitution, does not sit as an Appellate Court. Its jurisdiction is only to see that the Government has acted fairly, and once it is satisfied on that score, no further scrutiny is permissible. In view of the fact that ACC and other entrepreneurs backed out, and in view of the further fact that the Dalmias offered to purchase the shares of the Corporation at Rs. 75/- per share as against Rs. 20/- (the value placed upon them by Billimoria and Co. Bombay), the deal must be said to be in the interest of public and the State. The concessions extended to the 5th respondent are neither unusual nor out of ordinary. They are the normal concessions extended to any sick or loss making unit -- or for that matter, to a newly established industrial unit.
23. We may mention that Shri S. P. Gupta, learned counsel for the petitioners, disclaimed any role or responsibility for production of the forged order on 4-3-1991. He said that none of the petitioners are responsible therefor. He said that the said order was not produced by any of the petitioners or their representatives. It is said to have been produced by the Chairman of the Corporation from out of his pocket. There is absolutely no material he says in our opinion rightly to connect the petitioners with the said affair. He further submitted that Cl. 9 of the MOU does not fully safeguard the service conditions of the employees. He submitted that there was an agreement between the Corporation and the workers to treat them on par with the employees of the Cement Corporation of India and this may not he honoured by the new management dominated by the 5th respondent. In any event, he submitted that when it is brought to the notice of this Court that public property worth several hundred of crores of rupees is being parted with in favour of a private party for practically no consideration, this Court must step into protect public interest and examine the matter to safeguard the interest of the public and the State.
Part V : 24. It is not alleged by the petitioners that the State of Uttar Pradesh has embarked upon privatisation as a matter of policy. The State also does not-say so, nor is there any material to hold so. It is not privatising all the public sector Corporations as a matter of principle or as a matter of ideological or philosphical faith. It is privatising only those public sector Corporations which have been consistently incurring losses over the last several years and where it finds that it is not possible for it to redress the situation and to put the industry back on rails. Let us take the case of this very Corporation. Over the last 20 years, it has been consistently incurring losses except for one year. Its entire capital base has been wiped out. It owes more than Rupees 100 crores to financial Institutions. To put it on proper lines, substantial fresh investment is necessary, which the Government is not in a position to spare. In these circumstances, the Government has decided to privatise it. Mr. Gupta says that instead of deciding to privatise it, the Government ought to have tried to identify the causes of the failure and to take steps to rectify the same. This, he says, is the constitutional obligation of the State. But as we have pointed hereinbefore, the real problem is not the identification of the causes -- they are too well known; the real problem is the will and the capacity to take steps to rectify the situation. Successive Governments have found it beyond themselves to redress the situation over the last twenty years. The Government has its own limitations and compulsions. In this situation, it took the decision to privatise. It cannot be said to be a mala fide decision. The petitioners may have a different view, but that is not very material. It was for the Government to take the decision and in the circumstances, it cannot be termed to be a colourable one i.e. arrived at for achieving an ulterior or oblique objective. No unconstitutionality is involved in this decision. Similarly, it is true, as has been held on the basis of the provisions in Art. 19(6), that nationalisation must be deemed to be in public interest. But from this it does not follow that any and every act of
denationalisation/privatisation is per se contrary to public interest. Indeed, in a given case, privatisation may be in public interest. After all, whose money is lost if a public sector enterprise incurs huge losses consistently? It is public money -- whether it comes from Government funds or DBI or SBI. One may have to weigh all the factors and determine what is ultimately in public interest. So long as the decision is arrived at by the Government bona fide, this Court cannot sit in judgment over it. In the circumstances of UPSCCL, we cannot say that the decision of the Government to privatise it is not a bona fide decision. We are unable to see how such a decision can be said to violate the directive principles in Arts. 38 and 39. These Articles point out the goal; they do not prescribe a particular path. A Government is not precluded from acting as any other prudent owner would in such circumstances. The privatisation in question is only an instance of prudent management, which any other owner in the position of the State Government could have undertaken. We cannot read the decisions cited by Mr. Gupla as laying down any proposition that whatever be the situation, no public sector concern can ever be privatised. It is also not a case where the Government is seeking to privatise a public sector concern merely because it is incurring losses. If that were the only ground, the situation would probably have been different, but here is a case where in addition to continuous losses, there has been a constant and steady fall in actual production vis-a-vis the installed capacity. Moreover, huge funds are also required for rehabilitating the units, which the Government thinks it is in no position to provide. In such a situation, it cannot be said that the decision to privatise the UPSCCL is either a mala fide one or that it is prohibited by the constitutional provisions. The contention urged by Mr. S. P. Gupta may become relevant if and when the State embarks upon privatisation as a matter of policy or ideological compulsion, unrelated to the facts and circumstances of the public sector ventures. It need not be considered in these writ petitions. This discussion, however, calls for a brief reference to the trend of privatisation gaining currency all over the world.
25. A fresh wind of change is blowing across the globe, the wind of privatisation --some call it the process of disinvestment (by State) though both terms may not- be synonymous.
The years following the termination of world war II was many a former colony emerging as a free nation. India was one among them. Jawahar Lal Nehru had a vision of India which aimed at political, social and economic justice to the people of India. In economic sphere, it meant growth accompanied by distributive justice; it contemplated State playing a dominant role in reshaping the Indian economy. The concept of welfare state, he envisioned, called for State control of the commanding heights of the economy. The Industrial policy resolution gave shape to this thinking. It was felt that capitalist path of development does not suit this country, nor can it follow the path trod by Soviet Union. A humanist path towards socialistic pattern of society was ideal for India. Cls.(b) and (c) of Art. 39 of the Constitution illustrated this ideal. According to it, the State shall, in particular, direct its policy towards security "(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good (and) (c)that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment." As is well known, there were two competing economic doctrines-- one spoke of growth and growth alone, while the other spoke of growth accompanied by distributive justice. Cls, (b) and (c) of Art. 39 illustrate the latter doctrine. The Industrial policy resolution of 1948 clearly contemplated the State controlling the commanding heights. It is in pursuance of this policy that substantial resources of the State were diverted to establishment of key industries, nationalisation of several important sectors, like insurance, transport, power, banking and so on. It was said that private enterprise in India is neither willing nor is capable of establishing heavy industries, which the State alone must undertake. Theories propounded by certain British economists of labour persuasion influenced our thinking at that stage.
The experiment of State-run industries has not been happy in England. It has been much less happy in India. While other countries in Europe progressed by leaps and bounds, British economy stagnated. Then came Mrs. Margaret Thacher with the slogan of privatisation. She undertook the job of disinvestment with gusto. Major British industries from British Airways down to Traffic Lights were privatised. The process is still on. Shares in these companies were sold to public at large. Result is that 30 per cent or more of the British population has become stock holders. Whether on account of this or otherwise, British economy turned the corner. Towards the close of 1980s, Russian economy reached a critical stage. It was realised that total state control of the economy over centralisation was having a deadening effect upon the average man's initiative, drive and enterprise. People had no incentive to work and to produce more. It was felt that a market oriented economy -- or what is called market friendly economy -- is the solution. They started restructuring their economy accordingly what is popularly known as 'perestroika' accompanied by 'glasnost' (Openness). Other eastern European countries hitherto following the Soviet Pattern started changing at a greater speed -- it has been a lurch away from socialist economy. These winds of change could not but affect the thinking in our country as well. It is infecting the entire world. In mid 80s our Government veered round to the view that a sheltered and protected economy, which may have served us well at the initial stages of development, is no longer workable. It led to deterioration in the quality" of our products; they could not compete in the world market, they were priced out. Without a proper level of exports, our balance of payments position became precarious. In such a situation, the view that liberalisation of the economy is the answer, gained acceptance in official thinking. The idea was to integrate our economy into world economy, to make our industries compete with industries the world over. But what about the public sector? How does it rhyme with the new thinking? Leviathan in proportions, it has not been growing even at, what is derisively called, the 'Hindu rate of growth : And what about the losses being merrily run up by many of them? Even taking an overall picture, the publip sector as a whole has not been yielding a profit of more than 2 to 3 per cent of the capital invested in it. Several economists, committees and commissions have gone into the causes of this poor performance, and have suggested several steps to redress it. (A brief discussion of this aspect is found in paras 29 to 31 of a judgment rendered by one of us (Jeevan Reddy C.J.) in Grindwell Norton v. A.P.S.E.B. AIR 1989 Andh Pra 14. But nothing meaningful could be done to repair the situation. Meanwhile, our economy has been steadily going downhill, which developed its own compulsions, which we need not refer to here. Willy nilly, we seem to have embarked on a.process of disinvestment by State. It is as yet in an emerging stage, of course.
PART VI : 26. The more important and crucial question to be examined is how did the Government go about it; how did it proceed in the matter; did it adopt and follow a procedure consistent with public interest; and did it safeguard public interest while parting with a major chunk of its ownership in a major public sector Corporation? That the Court is entitled to examine these questions is beyond the pale of controversy. In Fertilizer Corporation Kamgar Union, Sindri v. Union of India, AIR 1981 SC 344, the Supreme Court proceeded to examine the merits of a complaint by workers of the Fertilizer Corporation that certain machinery said to be surplus and obsolete was being sold for a song. It has been held in National Textiles Worker's Union v. P.R. Ramakrishnana, AIR 1983 SC 75, that in winding up proceedings, the workers have a right to be heard and they must be held to have the necessary locus standi to maintain a writ petition designed to protect their interest. In Gujarat Steel Tubes Ltd. v. Gujarat Steel Tubes Mazdoor Sabha, AIR 1980 SC 1896, it has been held that workers are equal partners in an enterprise. It must, therefore, be held that workers and employees of a public sector concern are vitally interested in the matter and that, in any event, when such an important matter is brought to the notice of this Court, it is entitled to examine the same with a view to safeguard public interest. Judiciary is also an organ of the State and is as much committed to public weal as any other wing of the State.
27. Once a decision to privatise was taken, and before any offers were invited, one would have expected the Government to have ordered a thorough valuation of the assets and liabilities of the Corporation to find out what it is worth. Any reasonable and prudent owner of property would do this before he puts his property for sale. He would first assess for himself the value of the property he is selling, since that alone would enable him to judge the offers received unless, of course, it is a distress sale. The same ought to have been done by the State Government both as a prudent owner and also because it is in the nature of a trustee of the public property. It is, however, surprising to note that no such effort was made. The first move towards privatisation was made by the Government by its letter dated 16-4-1990 addressed to IDBI seeking its guidance about privatisation and requesting them to send a nominee to finalise the details of the proposal. No follow-up action was taken. Then followed the advertisement in the newspaper 'Economic Times' on 1-5-1990. 25 persons responded and there was a preliminary meeting on 15-5-1990. Even then, no attempt was made to value the net worth of the Corporation. What is significant in this connection is that in the very first meeting of the PC held on 11-9-1990, one of the members Sri A. K. Puri suggested that before taking any step in this behalf, it is essential to determine the present value of these units. He suggested that valuation of these units should be undertaken without any delay. He also suggested the names of five agencies, including A.F. Ferguson & Co., New Delhi and Price Waterhouse Associates, New Delhi, for this purpose. The Committee agreed with this suggestion and constituted a sub-committee comprising five members to select valuers for the purpose and have these units valued. It appears rather inexplicable that no steps whatsoever were taken to have the assets of the Corporation valued through any of those five agencies, nor through any other agency. What happened is that during this course of negotiations with ACC, they suggested on 13-9-1990 that report of a chartered accountant be obtained to determine the present value of the shares of the Corporation and also to have a physical verification of its assets. The ACC also indicated their choice of the chartered accountant, namely, Billimoria & Co., Accordingly, the said firm of chartered accountants was asked to value the shares. They valued the shares at Rs. 20/- per share. They did not undertake valuation of assets. A good amount of criticism has been levelled against the basis adopted by the said firm for valuing the shares, and the manner in which they went about their job. It is really unnecessary to dilate upon the correctness of their report, because no one appears to have attached any value to it. The Dalmia Industries offered to purchase 51 per cent shares of the Corporation at Rs. 45/- per share, with- out asking for any kind of concession, facility or accommodation. This shows that the valuation made by the Billimoria & Co. was wide off the mark. In this context, it would be appropriate to refer to the pleadings of the parties. According to the petitioners, the value of the assets of the Corporation is more than Rupees 700 crores. In the counter-affidavit filed by the Government this figure has been disputed as exaggerated and incorrect, but the Government has made no effort to give its own figure. Evidently, it could not, in the absence of any valutailon by a competent agency. The fact remains that the Corporation owns 13.5 Sq. kms. of land wherein are situated factories and other allied buildings, six residential colonies comprising five thousand dwelling units, six recognised educational institutions, besides limestone mines and a building called 'cement Bhawan' at Lucknow. There is a subsisting contract for supply of slag with Bokaro Steels, where-under, according to the petitioners, the Corporation gets slag at 1/3rd of the market rate. The above particulars relating to the assets of the Corporation are not denied in the counter-affidavit. It may be remembered that the paid up capital of the Corporation is about Rupees 64 crores. As against this, the Corporation has run up an accumulated loss of about Rupees 180 crores. About Rupees 100 crores is due to the Financial Agencies and about 10 and odd crores to the State Government. In the above circumstances, it cannot be said that the liabilities of the Corporation are almost equal to its assets. It is well known that value of land and buildings has been appreciating over the last several decades. Even allowing for depreciation their value should be substantial. Evidently, it was for this reason that the Dalmias offered to purchase the shares at Rs.45/- each, even without asking for any type of concession, facility or accommodation, and ultimately, they agreed to pay Rs. 75/- per share, subject to the Government granting concessions, facilities and accommodations mentioned in the MOU and the GOS. We are told that a formal agreement has also been entered into between the Government and the Dalmia Industries, but a copy of the agreement has not been made available to us. (We presume that the agreement is in ihe same terms as the MOU and GOS aforesaid mentioned).
28. Two questions have to be answered; What is it, the Dalmia Industries have got under the deal, and what is it, they have paid? We know what they have paid. According to the MOU, the total amount payable by them for 51 per cent of the shares at Rs. 75/- per share is a little above 26 crores. Of this amount, they paid one crore at the time of signing the agreement. Two crores they agreed to pay within three months of the signing of the agreement. (We are told at the time of the hearing of the petitions that this amount has been paid). Another two crores they have agreed to pay within six months of the signing of the agreement. The balance amount of about Rupees 21 crores is payable within 24 months of the date of the MOU. It, no doubt, carries interest at 12% per annum, but this amount when paid to Government, has to be re-invested by the Government, as secured loan or against secured debentures, in the Corporation. These loans are to carry interest at 12% and are redeemable after five years in four equal instalments. Certain units controlled by the Dalmia Industries were to furnish a corporate guarantee for this balance amount. Under clause 9 of the MOU, it was. agreed that all the employees of the Corporation will be taken over on 'as is where is' basis, which means that they will be continued on the same basis. As against four directors of the Government, the Dalmias are to have five directors. Managing Director is to be appointed out of the five directors nominated by the Dalmias. The State Government clearly declared that they will not give any guarantee for funds to be raised in future by the Corporation. As against this, the following concessions were extended by the State Government. For a period of five years, the Corporation was exempt from payment of Sales Tax. The amount collected by it on account of Sales Tax during this period has to be paid in the five equal annual instalments. Payment of these instalments is to begin after the expiry of eight years. The debts due to the State Government and its agencies to the extent of Rupees 25 crores were re-scheduled. There was to be a moratorium for a period of three years, whereafter the said-debts were to be repaid in five equal instalments. These debts were to carry interest at 12% with rebate of 3% for timely and prompt payment. Besides this, contingent liabilities of Rs. 1.4 crores to the Sales Tax Department and 11 lakhs towards stamp duty were to be waived. Further, Sales Tax Department was to be requested by the State Government to drop all its cases -- a very significant and pregnant concession. The last clause of the MOU provided that the memo of articles of association of the Corporation will be suitably amended to reflect the changed version of the Company and other changes envisaged in the Board etc. Mr. S.P. Gupta contends that 51 percent of ownership of the Corporation was made over to Dalmia Industries on a mere payment of rupees one crore. In any event, the real cash payment, he says, is only rupees five crores. The rest is, no doubt, payable within two years, but when paid, it has to be reinvested by the Slate Government in the very same Corporation, which again is repayable after a period of five years in four equal instalments which means that the payment will really begin after seven years. His argument, therefore, is that assets worth rupees 700 corres were made over for a mere pittance. The State Government, no doubt, denies this imputation vehemently, but strangely, as it may seem, they have not given their valuation of the net worth of the Corporation. As we have pointed out hereinbefore, since they have made no attempt to have the net worth of the Corporation valued by any competent agency, they could not also have stated the same clearly. It is not as if they were not aware of this requirement. We may repeat that in the very first meeting of the PC, one of its members opined that it was essential to value the assets of these units before any step is taken towards their privatisation. He also suggested agencies competent to do the job. Other members of the Committee agreed with his suggestion and a sub-committee was also constituted to select the agency and have the valuation done, but no such valuation was done. Instead, Billimoria & Co. was asked to do it and they made a mere superficial job. As we have said above, no one has taken the said valuation seriously.
29. When a factory/industry/company is acquired by Government, they do not merely pay the prevailing value of the shares (in a case where shares of such company are quoted on Stock Exchange), such values are determined by a Complex array of consideration. The normal method of determining the compensation in such cases is to value the assets, determine the liabilities and find out its net worth-unless, of course, the compensation is fixed by the enactment itself. In this connection, it would be relevant to notice certain observations made by the Supreme Court in R.C. Cooper v. Union of India, AIR 1970 SC 564 at pp. 609 to 611 :
"
The important methods of determination of compensation are -- (1) market value determined from sales of comparable properties, proximate in time to the date of acquisition, similarly situate, and possessing the same or similar advantages and subject to the same or similar disadvantages. Market value is the price the property may fetch in the open market if sold by a willing seller unaffeted by the special needs of a particular purchase; (ii) capitalization of the net annual profit out of the property at a rate equal in normal cases to the return from gilt-edged securities. Ordinarily in value of the property may be determined by capitalizing the net annual value obtainable in the market at the date of the notice of acquisition, (iii) where the property is a house, expenditure likely to be incurred for constructing a similar house, and reduced by the depreciation for the number of years since it was constructed; (iv) principle of reinstatement, where it is satisfactorily established that re-instatement in some other place is bona fide intended, there being no general market for the property for the purpose for which it is devoted (the purpose being a public purpose) and would have continued to be devoted, but for compulsory acquisition. Here compensation will be assessed on the basis of reasonable cost of re-instatement; (v) when the property has outgrown its utility and it is reasonably incapable of economic use, it may be valued as land plus the break up value of the structure. But the fact that the acquirer does not intend to use the property for which it is used at the time of acquisition and desires to demolish it or use it for other purpose is irrelevant; and (vi) the property to be acquired has ordinarily to be valued as unit. Normally an aggregate of the value of different components will not be the value of the unit.
These are, however, not the only methods. The method of determining the value of the property by the application of an appropriate multiplier to the net annual income or profit is a satisfactory method of valuation of lands with buildings, only if the land is fully developed, i.e., it has been put to full use legally permissible and economically justifiable, and the income out of the property in the normal commercial and not a controlled return or a return depreciated on account of special circumstances. If the property is not fully developed, or the return is not commercial the method may yield a misleading result.
.....
Compensation to be determined under the Act is for acquisition of the undertaking, but the Act instead of providing for valuing the entire undertaking as a unit provides for determining the value of some only of the components, which constitute the undertaking, and reduced by the liabilities. It also provides different methods of determining compensation in respect of each such component. This method of determinatin of compensation is prima facie not a method relevant to the determination of compensation for acquisition of the undertaking. Aggregate of the value of components is not necessarily the value of the entirety of a unit of property acquired, especially when the property acquired is a going concern, with an organized business. On that ground alone, acquisition of the undertaking is liable to be declared invalid, for it impairs the Constitutional guarantee for payment of compensation for acquisition of property by law. Even if it be assumed that the aggregate value of the different components will be equal to the value of the undertaking of the named bank as a going concern the principles specified in our judgment, do not give a true recompense to the banks for the loss of the undertaking..... It appears clear that in determining the compensation for undertaking-- (i) certain important classes of assets are omitted from the heads (a) to (h); (ii) the method specified for valuation of lands and buildings is not relevant to determination of compensation, and the value determined thereby in certain circumstances is illusory as compensation; and (iii) the principle for determination of the aggregate value of liabilities is also irrelevant.
.....
The value determined by excluding important components of the undertaking, such as the good will and value of the unexpired period of leases, will not, in our judgment, be compensation for the undertaking."
30. It cannot be denied that by selling 51 per cent share holding in the Corporation, the Government has in truth transferred 51 per cent of its ownership. Before determining the price, at which the shares were to be sold, the Government ought to have, as a reasonable and prudent owner, and more so because it is in the nature of a trustee vis-a-vis public property, got a thorough valuation done of the assets and liabilities to find out the net worth of the Corporation. It would then have known what it was selling and would have been in a better position to determine which offer to accept and at what figure. Without such a valuation, the determination of rate of shares for the purpose of the sale was without any basis. We are left wondering whether any of the persons responsible for the deal would have acted in the same fashion, if they had been selling 51 per cent shares in a company owned by them.
31. Now, corning to the two questions raised by us a little while ago, we do not know the net worth of the assets of the Corporation and, therefore, we cannot say what did the Dalmia Industries get in the shape of 51 per cent of the shares of the Corporation. In the face of a mere general denial in the counter-affidavit, without giving any valuation of their own, we would well have been justified in holding that the figures mentioned by the petitioners are correct, which would mean that the assessets are valued at more than rupees 700 crores, while the liabilities are in the region of rupees 200 crores. In that event, net worth would not be less than 500 crores, 51 per cent whereof would be worth more than rupees 250 crores, which is being sold for rupees 26 crores, and even that accompanied by so many concessions and accommodations. But, we are of the considered opinion that adopting such a course would not be just and proper one, in all the circumstances of the case. The deal has gone through and the subject-matter of the deal is of a very high value. Though we are not satisfied with the manner in which the Government and its agencies have proceeded in the matter, we are of the opinion that before we can pass any final orders in the writ petitions, we should have the net worth of the Corporation valued, at least now, through a reputed and well-known agency. For this purpose, we fall back upon the very same material as is disclosed in the minutes of the first meeting of the PC. Five agencies were mentioned, who, according to Sri A.K. Puri, were competent to value the assets and liabilities of the Corporation to find out its net worth. Accordingly, we appoint two agencies, namely, A. F. Foreguson & Co., New Delhi and Price Water-house Associates, New Delhi, and request them to independently value the assets and liabilities of the UPSCCL and to determine the net worth of the Corporation as on 1-2-1991. Both the agencies shall independently do their job and submit their reports separately. The reports shall be submitted within two months of service of a copy of this order upon them. The Government, the Corporation, the 5th respondent and the petitioners shall furnish all assistance to the said agencies in doing and completing their job. The expenses of the said exercise by both the agencies shall be borne by the State Government. For this purpose, the State Government is directed to deposit a sum of rupees three lakhs into the Court within ten days from today. Of this amount, a sum of rupees Fifty thousand shall be paid to each of the said firms as initial payment. The total fees payable to each of the agencies will be determined by this Court later in consultation with them.
Post these matters after the receipt of the reports of the said two firms.
32. Order accordingly.
22/7/1991


                 HIGH COURT OF JUDICATURE OF ALLAHABAD
                                 In chamber
MISC. COMPANY APPLICATION NO. 4 OF 1997
        In the matter of
U.P. State Cement Corporation Ltd. ( In Liq.)        
 Hon'ble Sunil Ambwani, J.
1. Present Shri Ashok Mehta for Official Liquidator; Shri S.K. Saxena, Official Liquidator; Shri W.H. Khan for U.P. Power Corporation;  Shri M.S. Pipersania & Shri Anil Mehrotra for State; Shri Navin Sinha, Senior Advocate for JAL; Shri R.P. Singh, District Magistrate, Sonbhadra; Shri V.K. Singh, Chief Judicial Magistrate, Sonbhadra; Shri Haider Beg; Shri Arvind Kumar Dubey, Central Nazir, Judgeship at Sonbhadra; Shri J. Nagar for LIC;  Shri Harendra Pandey; and Shri A.K. Upadhyay.
2. Shri W.H. Khan, appearing for U.P. Power Corporation, has pressed for settlement of the claims of the Corporation. The dues of the U.P. Power Corporation have been considered by the Settlement Claims Committee in its report forwarded by the Official Liquidator. Shri W.H. Khan may inspect the report. The Corporation will be individually communicated with the adjudication of the claims and may raise their objections by 3rd January, 2007.
Possession of the Assets of the Company (In Liq.)
3. Shri Navin Sinha informs that in pursuance of the orders of the Court, the demarcation process of Kajrahat mines of Block I to IV is in process; in Ghurma the demarcation is complete; in Ningha the demarcation process has not started as yet and the demarcation process of Dolomite mines of Bari and Sinduria has not begun as yet.
4. Let the District Magistrate demarcate the limestone and dolomite mines. After demarcation, he will hand over possession of Kajrahat mines (except Block Nos. V to VII) and other limestone mines of Ningha &  Ghurma to JAL. He will also hand over possession of dolomite mines of Bari and Sinduria. The handing over possessions will not entitle JAL of mining operations until all legal requirements are complete. The mining operations shall be carried out only after complying with all  formalities in accordance with the law.
5. Shri R.P. Singh, District Magistrate, Sonbhadra states that it may take some time to vacate the houses in possession of state officers, occupied by the District officers including the houses in possession of Police and Judiciary and Power Corporation. Earlier he had requested for time upto 31.3.2007 for houses in possession of the officers working under him. The Superintendent of Police had expressed his inability to vacate as there is no  alternative arrangement. So far as the employees of U.P. Power Corporation are concerned, the possession shall be handed over as soon as the JAL is ready to take over the responsibility of sub stations. For this purpose, let the District Magistrate; Superintendent of Police; District Judge and Executive Engineer of the U.P. Power Corporation hold meetings and settle  with JAL the effective date, on which the possession may be handed over. In case of any disagreement they may approach the Court.
Shops.
6. The Official Liquidator states that he has handed over 8 shops at Chunar and is ready to hand over the vacant and abandoned shops. Let the vacant and abandoned shops be handed over immediately. It will be open to those shop keepers, who have deposited dues and electricity charges with the Official Liquidator to negotiate with the JAL for fresh terms of tenancy.
Plant and machinery
7. The Official Liquidator informs that the possession of plant and machinery at Dalla and Chunar has been handed over to JAL. He has offered to hand over the possession of plant and machinery at Churk. The JAL has expressed its willingness to take over possession. Let it be handed over within a week.
8. Shri Navin Sinha informs that the demarcation of free hold lands is complete. The encroachments, however, have not been removed. The District Magistrate may take effective steps with the help of police to remove unauthorized occupants to hand over possession to JAL.
9. It is reported by JAL that there is shortage of land in some areas. Let these shortages be re-assessed and sorted out with the Official Liquidator. The possession of raw material/current fiscal assets shall also be handed over. The Official Liquidator will also issue letter of authority to JAL to receive the bonus shares of U.P. Asbestos Limited.
10. The Court has already issued directions to the Official Liquidator to prepare 100 copies of the report of the settlement claims committee. He states that these copies have been circulated at Churk; Dalla; Ghurma and Chunar. The objections to the settlement of claims be categorized; compiled and submitted to the Court on 3.1.2007. The matter will be listed in Court on 3.1.2007 to be taken over at  10.00 AM. The hearing on objections will begin on that date.
11 placed by way of the affidavit of the Secretary concerned by 3.1.2007. . Shri Anil Mehrotra, appearing for the State Government, has made some objections with regard to handing over possession of the mines and mining operations. He had made similar objections earlier also. The court cannot allow the oral objections to be made in the proceedings by any party. In case the State Government has any objection, let these be
12. List on 20.12.2006
Dt.13.12.2006

Equivalent citations: 2000 100 CompCas 76 All, (2000) 1 UPLBEC 392
Bench: S Narain
Cement Workers Union And Ors. vs Board For Industrial And Financial Reconstruction And Ors. on 8/12/1999
JUDGMENT
Sudhir Narain, J.
1. The petitioners seek a writ of certiorari quashing the order of the Board for Industrial and Financial Reconstruction (hereinafter referred to as "the Board") recommending to this court for winding up of U. P. State Cement Corporation Ltd. (hereinafter referred to as "the Corporation"), by its order dated July 2, 1997, and the orders of the Appellate Authority dated February 19, 1998, dismissing the appeal against the said order. The petitioners have further sought mandamus against the State of Uttar Pradesh to contribute the required funds for the revival of the Corporation and make payment of all the dues to the employees of the Corporation and to provide alternative employment to them in case the recommendation of the Board is accepted by this court.
2. The facts, in brief, are that the Corporation was originally functioning as an undertaking of the U. P. Government. It was converted into a public limited company in the year 1972. It is manufacturing cement. It has three units. The first unit was set up in the year 1954, at Churk. In 1972, another unit was set up at Dalla with an installed capacity of 4 lakhs t.p.a. Both these units manufacture cement under wet processing technology. In the year 1974, the IDBI along with other financial institutions and banks sanctioned financial assistance to the Corporation to set up a dry process cement plant with clinkerisation unit at Dalla of capacity of 8 lakhs t.p.a. and cement grinding unit at Chunar for manufacture of Portland Blast Furnace Slag Cement of 16.8 lakhs t.p.a.
3. The Corporation went on accumulating losses. In September 1991, the loss amounted to Rs. 180,13 crores while its paid up capital was Rs. 68.28 crores. On March 31, 1994, the loss was Rs. 319.81 crores and share capital and reserves were Rs. 68.29 crores. On March 31, 1998, the loss further increased to Rs. 548.85 crores.
4. The board of directors of the Corporation found that the accumulated losses were exceeding the entire net worth of the Corporation and it has become a sick industrial company. They, after finalisation of the duly audited accounts of the company for the financial year, made a reference to the Board on March 28, 1992, under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short "the Act"), for determination of the measures which shall be adopted with respect to the sick company.
5. The Board on receiving the reference submitted by the board of direc tors of the Corporation considered it in its first meeting held on October 7, 1992, in which it declared the Corporation as a "sick industrial company" and appointed the Industrial Development Bank of India (in "short IDBI") as the operating agency as provided under Section 16 of the Act. The operating agency was directed to prepare and present a suitable scheme within 90 days with a further direction that it shall identify the surplus assets and arrange for their disposal. The Board held ten meetings to explore the possibility of revival of the company. In short the summary to the meetings is given as under :
7-10-1992--The Board declared the company as a sick industrial company. The Industrial Development Bank of India (IDBI) was directed to prepare and present a suitable scheme within 90 days. It was further directed to identify the surplus assets and arrange for their disposal for generating interest free funds. The promoters were also directed to submit their proposal to the operating agency.
24-12-1993.--The operating agency did not submit any scheme. It again directed the operating agency to present a scheme within the extended period of three months. The Board further asked the State Government to indicate its policy regarding rehabilitation.
5-12-1994.--The Board further allowed another six weeks time to present the scheme. The workers representative submitted that they were not ready to run the company through workers co-operative as they have no funds for the purpose.
28-12-1994--The operating agency presented a scheme involving expenditure of Rs. 122.23 crores to be met by the State Government. It was based on techno viability report of Cemtech India. As on March 31, 1994, the accumulated losses of the Corporation were Rs. 319.81 crores whereas the share capital and reserve were Rs. 68.29 crores. The Board directed the Corporation to submit an alternative proposal. In the meantime the operating agency was again directed to examine the possibility of mobilising resources by sale of surplus assets and was further advised to advertise inviting offers from private parties for rehabilitation of the Corporation.
18-5-1995.--The operating agency reported to the Board that in response to the advertisement made by it, four proposals were received-two from workers and two from outsiders. The State Government informed the Board that it was not possible by it to invest any funds and privatisation or joint sector was the only solution. The operating agency was asked to examine the four proposals received.
18-10-1995.--The operating agency informed the Board that the two outsiders who had submitted offers were not interested. Workers proposals were also not found acceptable. The Board gave a last opportunity to the State Government to locate some party to take over the Corporation. The operating agency was asked to make fresh advertisement for the purpose.
4-1-1996.--The operating agency reported to the Board that no concrete proposals were received by it in response to the fresh advertisement. The State Government (promoter) did not show any interest and no one attended the meeting. The Board gave further time to earlier two bidders to submit comprehensive proposals. It directed the Corporation to submit comprehensive proposals to one of the two outsiders (HBG was also directed to submit comprehensive proposal). The Board made it clear that if no proposal was received, a show-cause notice for winding up would be issued.
26-9-1996.--The Corporation submitted two alternative proposals--one involving1 investment of Rs. 444 crores (of which the State Government, the promoter was to contribute Rs. 101 crores) and the other involving investment of Rs. 228 crores (of which the promoter to contribute Rs. 189 crores). The State Government informed that in view of elections it does not have any brief regarding infusion of funds. The Board asked the State Government to convey its final views about the proposal submitted by the Corporation within six weeks.
18-11-1996.--The Board issued a show-cause notice why the Corporation be not wound up as the State Government did not express its opinion with regard to investment of funds for revival of the Corporation.
6-2-1997.--The Board gave a last opportunity to the Corporation, workers and the State Government to submit proposals with the means of finance fully tied up within two months.
2-7-1997.--The Corporation submitted fresh proposals but there was no response from the State Government. The Board came to the conclusion that it was not possible to revive the Corporation and, therefore, it should be wound up and accordingly submitted its opinion to this court for winding up of the Corporation.
6. Against the opinion of the Board three appeals were filed. Appeal No. 168 of 1997 was filed by the petitioners, Appeal No. 169 of 1997 by the Corporation and Appeal No. 8 of 1998, by the State Government. The appeal filed by the State of Uttar Pradesh was dismissed in default on February 17, 1998. The appeals filed by the petitioners and the Corporation were dismissed by a common order by the Appellate Authority on February 19, 1998.
7. It has to be examined as to whether the Board performed its duty under the provisions of the Act in making efforts to revive the Corporation which was declared as sick company. The object of the Act is to detect the sick companies and thereafter to provide measures by a body of experts to revive such companies. It is to help the sick industrial companies to revive them. The Statement of Objects and Reasons of the Act is as under (page 303 of 58 Comp Cas (St.)):
"The ill effects of sickness in industrial companies such as loss of production, loss of employment, loss of revenue to the Central and State Governments and locking up of investable funds of banks and financial institutions are of serious concern to the Government and the society at large. The concern of the Government is accentuated by the alarming increase in the incidence of sickness in industrial companies. It has been recognised that in order to fully utilise the productive industrial assets, afford maximum protection of employment and optimise the use of the funds of the banks and financial institutions, it would be imperative to revive and rehabilitate the potentially viable sick industrial companies as quickly as possible. It would also be equally imperative to salvage the productive assets and realise the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of those companies.
It has been the experience that the existing institutional arrangements and procedures for revival and rehabilitation of potentially viable sick industrial companies are both inadequate and time-consuming. A multiplicity of laws and agencies makes the adoption of a co-ordinated approach for dealing with sick industrial companies difficult. A need has, therefore, been felt to enact in public interest a legislation to provide for timely detection of sickness in industrial companies and for expeditious determination by a body of experts of the preventive, ameliorative, remedial and other measures that would need to be adopted with respect to such companies and for enforcement of the measures considered appropriate with utmost practicable despatch."
8. The Board has been entrusted with various duties under the various provisions under Chapter III of the Act. Section 15 casts a duty upon the board of directors of the sick industrial companies to make reference to the Board for determination of the measures which shall be adopted with respect to the company within 60 days from the date of finalisation of the duly audited accounts of the company for the financial year. The Board is to make inquiry under Section 16 of the Act determining whether any industrial company has become sick industrial company and may require an operating agency to enquire into and make a report with respect to such matters as may be specified in the order by the Board. The Board can make suitable orders on completion of the inquiry under Section 16 of the Act and shall decide whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. Under Sub-section (3) of Section 17 of the Act, it may direct any operating agency to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to a sick company for its revival. On preparation of the scheme it may sanction such scheme under Section 18(4) of the Act. Where the Board, after making inquiry under Section 16 and after considering all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of the opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financial obligations and that the company as a result thereof is not likely to become viable in future and that it is just and equitable that the company should be wound up, the Board may record and forward its opinion to the concerned High Court under Section 20(1) of the Act.
9. The Board appointed Industrial Bank of India (IDBI) as the operating agency. It gave directions to it in its various meetings held on several dates to take measures for revival of the Corporation. The operating agency issued advertisement inviting proposals for revival of the sick company. It presented a scheme on the basis of the report of Cemtech India involving an expenditure of Rs. 122.23 crores to be met by the State Government. The State Government in the meeting of the Board held on May 18, 1995, informed that it was not possible for the State Government to invest any funds. There were other four proposals which were also considered by the Board.
(1) Gujarat Ambuja Cements Ltd. : After submitting proposals it informed that it is not interested to take over.
(2) Dalmia Industries Ltd. : It sought one month's time for submitting a detailed proposal but finally it did not submit any proposal.
(3) Khandelwal Cement Ltd. (KCL) : They sought waiver of entire interest on term loans of financial institutions and banks which were not acceptable to them. It did not submit any further proposal.
(4) H. B. Group : It submitted a proposal after depositing Rs. 5 crores which was not a detailed proposal. The representative of H. B. Group submitted that in case no term loan is available from IDBI they were not interested in rehabilitation of the company. The proposal was thereafter dropped.
10. On behalf of the workers union, Dalla Shramik Sangathan and U. P. State Cement Corporation Workers Industrial Co-operative Society a proposal was submitted envisaging a total cost of Rs. 984 crores over a period of 12 years to be met by internal generation of Rs. 900 crores and untied loans of Rs. 84 crores. The operating agency examined both these proposals and they were not found viable. One Hari Sankar Roy representing Rajkiya Cement Mazdoor Sabha submitted before the Board in its meeting held on September 26, 1996, that they have not submitted any rehabilitation proposal but have indicated some modifications that need to be made in the proposal of the Corporation.
11. The Board asked the Corporation to submit its proposal to the operating agency. The operating agency submitted a report dated September 11, 1996, intimating that the Corporation had submitted a proposal on May 31, 1996, envisaging total expenditure of Rs. 144 crores in one scheme and Rs. 228 crores in the other alternative scheme. The cost of the scheme was proposed to be met, besides other sources, by promoters' contribution of Rs. 101 crores in the first scheme and Rs. 189 crores in the second alternative. The State Government (promoter) never committed to infuse its funds in the Corporation for its revival, the rehabilitation proposal could not be given effect to.
12. 'S. P. Gupta, learned senior advocate appearing for the petitioners vehemently urged that the Board failed to consider various aspects for revival of the Corporation and this has vitiated its opinion while recommending to this court for its winding up.
13. It is submitted that the State Government having not expressed any opinion in regard to the scheme submitted by the Corporation, it will be deemed that the consent was given as provided under Section 19(2) of the Act. Sub-section (2) of Section 19 provides that every scheme referred to in Sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of 60 days from the date of such circulation or within such further period not exceeding 60 days as may be allowed by the Board, and if no consent is received within such period, it shall be deemed that the consent has been given. Sub-section (2) must be read with Sub-section (1) which provides for a scheme. It reads as under :
"19. Rehabilitation by giving financial assistance.--(1) Where the scheme relates to preventive, ameliorative, remedial and other measures with respect to any sick industrial company, the scheme may provide for financial assistance by way of loans, advances or guarantees or reliefs or concessions or sacrifices from the Central Government, a State Government, any scheduled bank or other bank, a public financial institution or State level institution or any institution or other authority (any Government, bank, institution or other authority required by a scheme to provide for such financial assistance being hereafter in this section referred to as the person required by the scheme to provide financial assistance) to the sick industrial company.
(2) Every scheme referred to in Sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation (or within such further period, not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given.)"
14. Sub-section (2) of Section 19 of the Act is a deeming clause. In Consolidated Coffee Ltd. v. Coffee Board, AIR 1980 SC 1468 ; 46 STC 164 (SC) while considering the deeming provisions in Section 5(3) of the Central Sales Tax Act, the Supreme Court held that in modern legislation the word "deemed" is used in different senses and it is not that a deeming provision is every time made for the purpose of creating a fiction. It was observed (page 1479):
"Secondly, the word 'deemed' is used a great deal in modern legislation in different senses and it is not that a deeming provision is every time made for the purpose of creating a fiction. A deeming provision might be made to include what is obvious or what is uncertain or to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail, but in each case it would be a question as to with what object the Legislature has made such a deeming provision. In St. Aubyn v. Attorney-General [1952] AC 15 at page 53 Lord Radcliffe observed thus :
The word "deemed" is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible.' "
15. The observation of Lord Radcliffe in St. Aubyn v. Attorney-General [1952] AC 15 was quoted to find out as to for what purpose the legislation introduced the deeming clause. The different meanings of the word "deemed" have to be applied in the context of the legislative purpose and on the facts of each case.
16. Legal fiction has been created under Section 19(2) of the Act in regard to financial assistance by the person concerned to give an authority to the Board to proceed with the proposed rehabilitation scheme expeditiously. This legal fiction, however, will no longer survive, if an intention can be ascertained from the conduct of the parties against whom fiction has been created that he does not consent to the proposed scheme. The Board is not precluded from examining the reality after the veil of legal fiction is removed. It is necessary to examine the facts in this light. The operating agency on the basis of the report of Cemtech India presented a scheme on December 28, 1994, before the Board involving expenditure of Rs. 122.23 crores to be met by the State Government. The Board in its meeting held on May 18, 1995, observed as follows :
"The Bench further noted that a communication has been received from the State Government stating that keeping in view the magnitude of funds required for rehabilitation of the company as assessed by Cemtech and IDBI as operating agency, privatization including outright sale of the company switch over to the joint sector is the only feasible option for rehabilitating the company ; and that the State Government would not invest any money on its rehabilitation.
The State Government has clearly stated that they will not be able to induct any funds for the rehabilitation of the company and is in favour of the privatization. The long term liabilities of the company as on March 31, 1994, were Rs. 209 crores, comprising term loans from the institutions/ banks Rs. 142 crores, debentures Rs. 17 crores and unsecured loans from the State Government Rs. 40.04 crores."
17. It is in this meeting dated May 18, 1995, the Board gave certain directions to the State Government, Corporation and the operating agency. The offers made by other companies and also the worker unions were considered and were not found feasible.
18. The Corporation submitted two proposals before BIFR in its meeting held on September 26, 1996, One proposal envisaged total expenditure of Rs. 144 crores and another Rs. 222 crores under two different alternative schemes. The cost of the scheme envisaged contribution of Rs. 101 crores in the first alternative and Rs. 189 crores in the second alternative by the State Government. As the means of the finance were not fully tied up, the opinion of the State Government was sought. But it was noted that there was no response from the Government of Uttar Pradesh in this regard. The Corporation submitted another scheme in March, 1997, wherein the project cost was shown at Rs. 54.25 crores. The State Government again did not show its inclination to infuse the funds.
19. Once the State Government had earlier made it clear that it is not going to infuse any funds in the rehabilitation scheme and there was no material on the record to show that the State Government had changed its opinion, the deeming clause contained in Section 19(2) of the Act will not create a fiction. There were two aspects in relation to revival of the Corporation--one to make up the losses already incurred and, secondly, to invest the amount for modernisation of machinery, etc. The Corporation was suffering heavy losses year after year and as on March 31, 1994, the loss was Rs. 319 crores whereas the share capital and reserves were Rs. 68.29 crores. This loss further increased to Rs. 548.85 crores as on March 31, 1998. The units at Churk and Dalla were by wet process. It was an old process while according to modern technology the dry process was to be adopted and to some extent it was done in the year 1975. The State Government had earlier taken the stand that it will not infuse funds in the proposed scheme. In the context of these circumstances it is difficult to hold that the State Government shall be deemed to have consented to infusion of its funds for revival of the Corporation.
20. The second submission of learned counsel for the petitioner is that there were surplus assets of the Corporation and if surplus assets had been identified and sold by the operating agency, no additional fund was required to give effect to the rehabilitation scheme for revival of the Corporation. The words "surplus assets" have not been defined in the Act. In Strand's Judicial Dictionary, fifth edition, page 2570, the meaning of "surplus assets" has been given as under :
"(c) Surplus assets.--In the memorandum and articles of a company, 'surplus assets' means all the assets of the company remaining after creditors have been paid and the costs of winding up have been paid or provided for, but before any payment to members as such has been made or provided for. 'Any further surplus assets' means that part of the 'surplus assets' remaining after paying or providing for the members (Dimbula Valley (Ceylon) Tea Co. Ltd, v. Laurie [1961] 31 Comp Cas 655 ; [1961] 1 Ch. 353).
(d) Surplus assets.--In the memorandum of association of a company, was held to mean what was left after the payment of debts and the repayment of the whole of the preference and ordinary capital (Dunstable Portland Cement Co., In re 48 TLR 223)."
21. Here in the context of the Corporation which has been declared as sick company means the assets which are extra and can be disposed of without affecting the functioning of the Corporation in manufacturing cement and other functions which it carries on.
22. The Board directed the operating agency to identify the surplus assets and arrange for their disposal. It had issued other directions to the operating agency and these directions were as follows :
(a) Establishment of technical, economic and financial viability of the unit on a long term basis ;
(b) Generation of interest free funds ;
(c) Long term agreement with the workers.
23. The Board in its meeting dated December 24, 1993, observed "whether the assets would be surplus can be decided only when the viability of each individual unit per se is evaluated".
24. The petitioners before the Board did not point out any surplus assets of the Corporation. However, the surplus assets were shown in the report of Cemtech India, the Corporation and Workers' Scheme. The figures as given are as follows :
(Rs. in crores)
(i) Report by Cemtech India
7.07
(ii) The scheme submitted by the Corporation in March, 1997
22
(iii) Workers' Scheme
35
25. In the writ petition the petitioners took the stand that the surplus assets were not identified by the operating agency and the Board having not taken this aspect into consideration, its order was vitiated. This court on May 5, 1998, while issuing notice to the respondents permitted the petitioners to file a supplementary affidavit disclosing therein the list of surplus assets of the Corporation, if any. In pursuance of this order the petitioner submitted a report of S.N. Singh and Company, Chartered Accountants, dated July 21, 1998, along with a supplementary affidavit. In this report the value of surplus assets has been estimated at Rs. 151 crores on the basis of the sale of the entire colony at Churk and Dalla. The relevant part of the report reads as under :
Churk :
In the rehabilitation package submitted by the union representatives it has been considered that the entire colony of Churk and Ghurma will be handed over to the State Government on the basis of market price.
This includes land, buildings, electrification, water supply, sewerage and sanitation, telephone facilities, etc., it has been proposed that the land pertaining to factory premises should be retained by the Corporation. It has also been covered under the rehabilitation package that the existing employees will be provided residential facilities by the district administration on rental basis.
Dalla :
Dalla having surplus land of approx. 100 acres which has been valued on the market price. The assets of schools and colleges will be transferred to State Government based on the market price. The shops and some other items will be disposed of at the market value.
Chunar :
The hilly land available at Chunar is surplus and may be disposed of at the market price. The assets of schools and colleges will be transferred to State Government at the market price.
The summary of the revaluation of surplus assets of U.P. State Cement Corporation Ltd, along with the relevant annexures is being enclosed herewith.
It may be seen that the surplus assets of the corporation are for Rs. 151 crores.
26. A counter-affidavit was filed by K.L. Meena wherein it has been specifically stated that the surplus assets of the Corporation are not free from encumbrances and all of its assets are mortgaged with the financial institutions and banks including the Industrial Bank of India against the loan taken by the Corporation in question. S. N. Singh and Company should have taken note of this fact. Further the report discloses that the entire colony of Churk and Ghurma will be handed over to the State Government on the basis of the market price which shows that even those alleged surplus assets have been based on complete financing by the State Government.
27. Singh, chartered accountant, further submitted the value of the school buildings in respect of Dalla, Chunar and Churk as surplus assets and took the view that the State Government may take over such building and provide funds to the extent of valuation of the school building. It has further valued the residential buildings at Churk and has taken the figures from the report of the share valuation of October, 1995, of A. F. Ferguson and Company, New Delhi, but has not taken into consideration the life factor nor has valued the correct replacement cost after depreciation which has been considered by A. F. Ferguson and Company. The valuation has to be made taking into account (i) estimated total useful life of the building, (ii) balance useful life on the basis of present condition of the building and (iii) depreciation/adjustment for past uses but they have not been taken into account. It is not denied that the property of the Corporation taken as surplus assets for the purpose of sale either belong to the State Government or it is hypothecated with the financial institutions and keeping in view this fact such surplus assets will hardly be sufficient for revival of the company taking into account the total cost of the scheme submitted by the Corporation.
28. The Corporation had a submitted scheme in March, 1997, wherein the value of the surplus assets was shown as Rs. 25 crores. The workers union had submitted the representation to the Industries Minister, a copy of which has been annexed as annexure 20 to the writ petition and while submitting the scheme in paragraph 7 it was stated that Rs. 35 crores can be generated from internal sources. The petitioners never indicated that the surplus assets were worth Rs. 150 crores. Cemtech India had submitted a report and Corporation had also submitted a scheme in March, 1997, wherein the estimate of the surplus assets was given. From the entire facts, discussed above, it has not been shown that the surplus assets are such which can generate the amount for rehabilitation of the sick Corporation.
29. The third ground of attack against the opinion of the Board is that it failed to publish the scheme submitted by the operating agency under Section 18(3)(a) of the Act which provides that the scheme prepared by the operating agency shall be examined by the Board and a copy of the scheme with modification, if any, made by the Board, shall be sent, in draft, to the sick industrial company and the operating agency and in the case of amalgamation also, to any other company concerned, and the Board shall publish or cause to be published the draft scheme in brief in such daily newspaper as the Board may consider necessary for suggestions and objections, if any, within such period as the Board may specify.
30. Admittedly, the Board appointed the Industrial Bank of India as operating agency and directed it to prepare and present a suitable scheme. The operating agency presented a scheme involving expenditure of Rs. 122.23 crores to be met by the State Government. In its meetings held on December 28, 1994, the Board directed the Corporation to submit an alternative proposal for its revival. The workers were also permitted to submit their rehabilitation proposal. The operating agency was directed on receipt of the proposal to examine it to find out whether such schemes were viable with the means of finance tied up. In the next meeting held on May 18, 1995, the State Government informed the Board that it was not possible to invest any funds in the rehabilitation scheme. The operating agency reported that in response to the advertisement released by it four proposals were received--two from the workers and two from outsiders. These proposals were also not found acceptable for the reasons that the funds were not available for rehabilitation of scheme. The Board went on exploring the possibility to find out a revival scheme with the means of finance fully tied up. The scheme submitted by the operating agency was in these circumstances, never published.
31. The contention of the Corporation and the State Government is that unless the proposals submitted by the operating agency with means of finance fully tied up, it could not be taken as a draft scheme so as to compel the Board to get it published in the daily newspaper as provided under Section 18(3)(a) of 1985 Act. It is contended that if a scheme is submitted by the operating agency, it has to be first examined by the Board and only thereafter the Board shall publish or cause to be published and if in the examination of the scheme it finds that such scheme is not with the means fully tied up, it cannot prepare a draft scheme so as to send it for publication.
32. The draft scheme is to be published only as provided under regulation 28 of the Board for Industrial and Financial Reconstruction Regulations, 1987, which reads as under :
"28. The Board, after considering the scheme prepared by the operating agency and report thereon, if any, of the secretary, submitted in pursuance of an order made by the Board, on the point as to whether the scheme has been prepared in accordance with the guidelines specified in the order of the Board made under Sub-section (3) of Section 17, shall prepare a draft scheme and cause a copy of the same to be sent to the sick industrial company and the operating agency :
Provided that in case the said scheme envisages amalgamation of the sick industrial company with another industrial company or vice-versa a copy thereof shall also be sent to the transferee-company and any other company concerned in the amalgamation for suggestions and objections if any. The suggestions and objections, if any, shall be furnished to the Board within such time as may be specified by the Board :
Provided that the Board may, at the request of the concerned party and on sufficient cause being shown, suitably extend the time for submission of suggestions and objections."
33. There is nothing to show that the draft scheme was prepared by the Board and in the absence of such draft scheme, there was nothing to be published as envisaged under regulation 28 of the Regulations.
34. Where the Board fails to prepare the draft scheme and get such scheme published in the daily newspaper as contemplated under Section 18(3)(a) of the Act, it is still to be examined that such failure has affected the prospect of the revival of the sick company. In this context a reference may be made to Clause (b) of Section 18(3) of the Act which provides that the Board may make such modifications, if any, in the draft scheme as it may consider necessary in the light of suggestions and objections received from the sick industrial company and the operating agency and also from the transferee industrial company and any other company concerned in the amalgamation and any shareholder or any creditors or employees of such companies. Regulation 29 provides that the Board shall publish or cause to be published short particulars concerning the draft scheme, by way of notification, in such daily newspaper and periodicals as it may consider necessary, inviting suggestion and objections regarding the draft scheme, within such time as may be mentioned in the notification, from the shareholders, creditors and employees of the sick industrial company the transferee-company as well as any other company concerned in the amalgamation.
35. The scheme is published with a view to invite objections from the (!) sick industrial company (2) operating agency (3) the transferee-company concerned in case of amalgamation and (4) from any shareholders, creditors or employees of the sick industrial company. The Board had given full opportunity to the Corporation, its workers and the operating agency. It is not their case that they have been deprived of their right to file objections to the scheme submitted by the operating agency. The workers were fully aware of the scheme and they were given opportunity to submit alternative proposal. Similarly, the Corporation was also given opportunity to submit alternative proposal. The scheme submitted by the operating agency envisaged investment of funds by the State Government. On behalf of the operating agency, V.M. Tawade, the General Manager of IDBI has filed a counter-affidavit. It has been stated that after submission of the scheme several objections were received from employees of the Corporation and the bank also and in those circumstances, by invoking the provisions of Section 18(3)(b), the Board issued certain directions. Those directions, inter alia, included the participation of petitioners, banks, and the Corporation in formulating the scheme for the long-term revival of the Corporation. The rehabilitation proposal when submitted was to be considered by the operating agency for preparing a fresh scheme. In view of the fact that ample opportunity was given to all concerned, the petitioners were not prejudiced by non-publication of the scheme submitted by the operating agency.
36. Fourthly, the petitioners have found fault in the steps taken by the Board in not passing a specific order as required under Section 17(1) of the Act which provides that if after making inquiry under Section 16, the Board is satisfied that a company has become a sick industrial company, the Board shall, after considering the relevant facts and circumstances of the case, decide as soon as may be, by order in writing, whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time. Sub-section (1) is to be read with Sub-sections (2) and (3) of the Act as on the basis of the order passed under Sub-section (1) the Board has to take further steps. The relevant provisions of Section 17(1), (2) and (3) read as under :
"17. Powers of Board to make suitable order on the completion of inquiry.--(1) If after making an inquiry under Section 16, the Board is satisfied that a company has become a sick industrial company, the Board shall, after considering all the relevant facts and circumstances of the case, decide, as soon as may be by order in writing, whether it is practicable for the company to make its net worth exceed the accumulated losses within a reasonable time.
(2) If the Board decides under Sub-section (1) that it is practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time, the Board, shall, by order in writing and subject to such restrictions or conditions as may be specified in the order, give such time to the company as it may deem fit to make its net worth positive.
(3) If the Board decides under Sub-section (1) that it is not practicable for a sick industrial company to make its net worth exceed the accumulated losses within a reasonable time and that it is necessary or expedient in the public interest to adopt all or any of the measures specified in Section 18 in relation to the said company it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company."
37. On a reference being made to the Board under Section 15 by an industrial company for determination of the measures which shall be adopted with reference to the company, the Board shall make an inquiry under Sub-section (1) of Section 16 of the Act, whether such industrial company has become a sick industrial company. It is only after it is satisfied that such company has become a sick industrial company, that it shall decide by an order in writing whether it is practicable for the company to make its net worth exceed its accumulated losses within a reasonable time. If it is practicable for the sick industrial company to make its net worth exceed its accumulated losses within a reasonable time, the Board shall give such company time to make its net worth exceed its accumulated losses and if it is not practicable for a sick industrial company to make its net worth exceed its accumulated losses within a reasonable time, it shall adopt the measures as provided under Section 18 of the Act. The order in writing is to be passed under Sub-section (1) of Section 17 of the Act only for the purpose to adopt either of the two courses for making the net worth exceed the accumulated losses. The Board can pass an order in writing regarding the capability of the sick industrial company to make its net worth exceed its accumulated losses only when such company places material before the Board and in the absence of any such material it has to pass an order as provided under Sub-section (3) of Section 17 of the Act.
38. In the first meeting held on October 7, 1992, the Board noted the statement of Usmani, the Executive Director of the Corporation as under :
"Usmani submitted that the unit had required potential and it could be revived with the required assistance from the bank and the financial institutions. Usmani added that at present, he had no scheme to submit for rehabilitation of the company. The company, had, however, gone for appointment of a technical consultant in consultation with IDBI for study of technical feasibility of the unit and would confirm his appointment to the Bench within 15 days. In view of the company's incurring a cash loss of Rs. 2.4 crores approximately daily Usmani requested the Bench for taking the measures as it deems fit for rehabilitation of the company."
39. The Board made further observation :
"The Bench further observed that the company was not in a position of rehabilitation with its own efforts. The Bench, therefore, appointed IDBI as operating agency in exercise of the powers under Section 17(3) of the Sick Industrial Companies (Special Provisions) Act. The operating agency was directed to submit a draft rehabilitation scheme keeping in view the provisions of Sections 18 and 19 of the Act."
40. The Board having come to the conclusion that the Corporation cannot be revived unless measures are taken for its rehabilitation, the mere fact that a specific order in writing under Section 17(1) of the Act was not passed before the measures were taken by the Board under Section 17(3) of the Act, the opinion submitted by it for winding up is not liable to be set aside on this ground.
41. The fifth submission of learned counsel for the petitioner is that the Corporation or the State Government could not be permitted to approbate and reprobate at the same time. It is contended that the Corporation as well as the State Government both had challenged the order of the Board before the Appellate Authority on many grounds which had been taken by the petitioners and now they cannot justify the order of the Board. A party to a proceeding may challenge an order but if the order is not challenged subsequently, it cannot be said that they are estopped from supporting the order. The State Government admittedly did not pursue the appeal filed by it and it was dismissed in default. As regards the appeal filed by the Corporation, it has been decided by a common order by the Appellate Authority in respect of the appeal filed by the Corporation and the petitioners.
42. A person cannot approbate and reprobate at the same time to the detriment of his opponent. In Bhau Ram v. Bay Nath Singh, AIR 1961 SC 1327, where a vendee who had filed an appeal by special leave to the Supreme Court against a pre-emption decree passed against him, it was held that he was not precluded from proceeding with the appeal, merely because he has withdrawn the pre-emption price. It was observed (headnote) :
"Upon this principle a person who takes benefit under an order de hors the claim on the merits cannot repudiate that part of the order which is detrimental to him because the order is to take effect in its entirety."
43. Learned counsel for the petitioner has placed reliance upon the decision in Official Receiver, Kurnool v. Vale Pedda Mounamma, AIR 1968 AP 336, wherein it was held that a party litigant cannot be permitted to assume inconsistent positions in court, to play fast and loose, to blow hot and cold, to approbate and reprobate, to the detriment of his opponent. In P. Saraswathi Ammal v. Lakshmi Ammal alias Lakshmi Kantam, AIR 1978 Mad 361, it was observed that a party cannot approbate and reprobate and compel the court to accept the case after an open exhibition of inconsistency. These principles can be applicable only when it is shown firstly, that there is an inconsistency and secondly, that the party has taken benefit while approbating or reprobating. The rehabilitation scheme could be enforced only when the State Government or the financial institutions infuse their funds in the scheme. The State Government never agreed to provide financial assistance in revival of the scheme. The mere fact that the appeal was filed taking a certain ground did not oblige the State Government to infuse the fund in carrying out the scheme submitted by the operating agency or the Corporation and support the version of the petitioners.
44. On behalf of the respondents it has been urged that the workers and other employees of the Corporation have no right to object to the proceeding before the Board nor can they raise technical objections before the High Court. In Navnit R. Kamani v. R.R. Kamani [1989] 66 Comp Cas 132 ; AIR 1989 SC 9, it has been held that the workers have a right to submit a rehabilitation scheme in the form of the co-operative societies and in case the scheme submitted by the workers is found to be viable by the Board, the same can be sanctioned. The workmen and the trade union representing their interest are entitled to be heard and to submit that the company can be revived. The workmen having devoted many years in the service of the company shall be thrown out of the employment if the company is not revived. They have put their toil for years in running the company. The trade unions, representing their interest, can submit their point of view in the interest of the workmen and while submitting the scheme for revival of the company they do not represent the interest of a single workman but of all the workers. The Act itself recognises the right of all concerned parties to submit objections and Section 25 permits "any person aggrieved" to file appeal. The apex court has upheld the right of workers in National Textile Workers' Union v. P.R. Ramakrishnan [1983] 53 Comp Cas 184 ; AIR 1983 SC 75, wherein it has been held that the workers of the company are entitled to appear at the hearing of the winding up petition whether to support or to oppose it so long as no winding up order is made by the court. It was observed as under (page 198) :
"... it is not only the shareholders who have supplied capital who are interested in the enterprise which is being run by a company but the workers who supplied labour are also equally, if not, more interested because what is produced by the enterprise is the result of labour as well as capital. In fact, the owners of capital bear only limited financial risk and otherwise' contribute nothing to production while labour contributes a major share of the product. While the former invest only a part of their moneys, the latter invest their sweat and toil, in fact their life itself. The workers, therefore, have a special place, in a socialistic pattern of society. They are not mere vendors of toil, they are not a marketable commodity to be purchased by owners of capital."
45. The workers can submit their own proposal. The workers were, however, given opportunity but they could not present any viable scheme and they were not interested in submitting any scheme run by the workers' co-operative society. In this petition the petitioners have not submitted that workers have their own viable scheme which was not considered by the Board. Their only contention is that the State Government could have infused funds or the Corporation could be revived by investment of the funds after sale of its surplus assets. As discussed above, it has not been found that there were any such surplus assets after sale of which the Corporation could be revived and its net worth could exceed heavy losses incurred by it. Secondly, mere sale of surplus assets was itself not sufficient for reviving the sick company as it has further to be examined that it will make its net worth exceed the accumulated losses within a reasonable time.
46. Great emphasis has been laid on the fact that it is not just and equitable that the Corporation should be wound up. It may be noted that the Corporation was declared a sick company by the Board on October 7, 1992, and for about five years it laboured hard to find a viable scheme so that the sick company could be revived and its net worth exceed the accumulated losses, (c)n September 30, 1991, the loss was Rs. 180.13 crores while share capital and reserves were Rs. 68 crores. On March 30, 1994, the loss was Rs. 319 crores and on March 31, 1998, it rose to Rs. 548.85 crores while the reserves remained the same. The running of an industry is based not only on investment of capital but the management and other factors are also responsible for the same. In the counter-affidavit filed by Satya Narain Singh on behalf of the State Government in paragraph 13 it has been stated that the major reasons for the sickness of the sick company were financial, productive, technical and raw material, managerial and marketing problems. The difficulties have been in erection/commissioning of the plants at Dalla, high cost of handling and transport of clinkers to Chunar, complex limestone deposit at marginal to below marginal quality, out-dated technology, high operating cost, high power consumption because of hard limestone, much work force, imbalances in plant machinery and inadequate maintenance also contributed to the loss and sickness of the sick company.
47. The financial institutions had given loan and the interest payable to them are heavy. The Board examined all the aspects. The court in this petition cannot substitute its own opinion. After examining the entire material in relation to the functioning of the sick company the BIFR has submitted its opinion that it is just and equitable to wind up the company. I do not find that the opinion submitted by the Board is perverse or there is any justifiable ground not to accept the same.
48. In the last, learned counsel for the petitioner submitted that the workmen had been working in the sick unit. They are entitled to wages till the winding up order is passed. This submission was also raised before the Board and it noted the submission in its meetings held on September 26, 1996, and observed as follows :
"In case the State Government decide to wind up the Corporation they should do so and pay all the dues of the labour. The present Government has different policy regarding sick P.S.Us, as compared to the previous Government and the workers are hopeful that a favourable view will be taken in this case."
49. There is no reason why the workers be not paid their salary. In view of the above discussion the writ petition is dismissed against the recommendation of the Board dated February 6, 1997, and the order of the Appellate Authority dated February 19, 1998. The writ petition, in so far as the direction in the nature of mandamus commanding respondent No. 4 to make payment of all dues to the workmen for the period till today, is allowed. In case respondent No. 4 is not able to pay the amount, on winding up of the Corporation, the payment shall be made to the workers prior to making any payment to any person in accordance with Section 529A of the Companies Act, 1956. The writ petition, as against the other reliefs claimed in the writ petition, is hereby dismissed.
50. The parties shall bear their own costs.
8/12/1999


Equivalent citations: 2002 112 CompCas 562 All
Bench: S Ambwani
In Re: U.P. Cement Corporation Ltd. (In Liquidation) vs on 14/2/2002
ORDER
Sunh Ambwani, J.
1. U.P. State Cement Corporation Ltd. (UPSCCL) was declared as a Sick Industrial Company by Board for Industrial and Financial Reconstruction (BIFR) on 7-10-1992, and IDBI was appointed as the Operating Agency. Cemtech India was appointed by UPSCCL to prepare a techno - viability report which was submitted in July, 1994. As on 31-3-1994, the accumulated losses of UPSCCL were Rs. 319.81 crores as against the share capital and reserves of Rs. 68.29 crores. Company did not submit any rehabilitation proposal or comments on the report submitted by Cemtech and thus BIFR directed the company to submit an alternative revival plan to the Operating Agency. The workers were also directed to submit rehabilitation proposal with the help of Tata Consultants within two months indicating the means of finance. No proposal was received by the Board within the time indicated. By the same order of the BIFR dated 28-12-1993, the State Bank of India, Allahabad Bank and IDBI were directed under Section 21 of the Sick Industrial Companies (Special Provisions) Act 1985, to prepare a complete inventory of all assets and liabilities and lists of registers/records/documents of shareholders and creditors and to get valuation done and to report the matter to the Board. Since no proposal were received the Operating Agency issued an advertisement for change in management on 6/8-3-1995. Four offers were received in response to the advertisement. The Operating Agency was required to examine the relative merits of the proposals. The State Government was also required to indicate their view regarding their equity of Rs. 68 lacs, and loans of Rs. 50 crores to UPSCCL in the event of privatization. Out of the four proposals, Gujarat Ambuja Cement Ltd., informed that they are not interested in the take-over and Dalmia Industries Ltd. did not submit any proposal. Dalla Sharamik Sangthan and U.P. State Cement Corporation Workers Industries Co-operative Society submitted proposals. The Operating Agency did not consider these proposals to be support worthy. In view of the employment of about 6000 workers, on the request of State Government, the Operating Agency was required to issue a fresh advertisement and to approach the resourceful parties to make reasonable efforts to locate resourceful parties to submit offers. Fresh Advertisement was issued on 24-11-1995. The Operating Agency also approached about fifteen major cement companies, but no concrete proposal was received. Dalmia Industries Ltd. H.B. group and Khandelwal Cement Ltd. sought time to submit proposals. They sought waiver of entire interest on term loans of financial institutions and bank which was not acceptable to them. Both the bidders were directed to deposit a some of Rs. 5 crores each in an interest bearing 'No Lien' account with the lead Bank by 15-2-1996, and the Operating Agency was directed to examine the proposals. H.B. Group submitted a proposal and requested for some information and visit to unit.
Opportunity was given to visit the units and to have a meeting with the State Government to settle the terms and conditions. No agreed comprehensive proposal came forward for consideration. The proposals of H.B. Group did not inform to any norms of one time settlement. The Financial Institution and Banks were also not prepared to enter into a fresh term loan agreement. The proposals required the State Government to induct fresh funds on which the State Government did not give its views. The Workers union did npt agree to enter into any kind of agreement with H.B. Group. After giving opportunity to the State Government to convey their view in the matter, the Board directed that if no comprehensive rehabilitation proposal was received from the State Government by 7-11 -1996, an opinion to wind up the company would be issued. Since the State Government requested for further time to constitute a Committee whose Chairman was to be nominated by the State Government, the Board looking into the circumstances, in which accumulated loss had increased to Rs. 380 crores and four years time had been spent in finding out and exploring all possibility of rehabilitation formed a prima facie opinion that the company was not likely to make its net worth positive within a reasonable time, while meeting all its financial obligations, and was not likely to become viable in future, and that it was thus just equitable, and in public interest that it should be wound up under Section 20(1) of the Act. A show-cause notice was issued on 18-11-1996,
2. On 6-2-1997 the Board found that H.B. Group had withdrawn their proposal and obtained refund of the amount. It gave a further opportunity to the company. State Government and Workers to submit a comprehensive twice. A revival proposal was submitted on 26-3-1997 for closure of two production lines, modernization/expansion of existing facilities. OTS of the dues of financial institution and banks, VRS as well as various concessions from the State Government including of induction of fresh funds for OTS, waiver of interest and conversion of their loans into equity. Operating Agency reported that the corporation will require interest free funds of order of about Rs. 250 crores for two years of implementation of scheme and that the State Government has not communicated their commitment to induct requisite interest-free funds in the corporation for its revival. Subsequently the Operating Agency by its letter dated 17-6-1997 informed that even during the extended period they have not received any communication from the Government of UP, and thus Board concluded that the promoters were not serious about rehabilitating the company, and that there was no rehabilitation proposal with means of finance fully tied up before the Board for consideration despite ample opportunities having been given to all concerned. The Board, thereafter confirmed this prima facie opinion that the company is not likely to make its net-worth exceed the accumulated losses with a reasonable time while meeting all its financial obligations, and that the company as a result thereof is not likely to become viable in future, and hence it should be wound up under Section 20(1). This opinion of the Board in its order dated 2-7-1997 was forwarded by the Registrar of BIFR vide its letter No. 60792-B-III dated 9-7-1997 to this Court which was received on 14-7-1997 in the Registry and on 17-7-1997 in the company section, and was registered as Company Application No. 4 of 1997.
3. Aggrieved by the aforesaid order of the BIFR the company filed an appeal No. 169 of 1997 before the AAIFR on 8-8-1997 which was admitted and the operation of the order of BIFR was stayed. The company moved an application No. 62817 dated 24-9-1997 on 25-9-1997 for staying the proceedings before this Court. Appeal was dismissed on 19-2-1998 upon, which the Chief Standing Counsel for State of U.P., filed an application No, 40402 of 1998 (A-8) under Section 20(2) of the Sick Industrial Company (Special Provisions) Act, 1985 dated 14-7-1998 filed on 15-7-1998 inform- ing the Court that the appeal has been dismissed on 19-2-1998 praying that the Court may order winding up of the UPCCL, and appointed an Officer as official liquidator of UPCCL having all the powers of Official Liquidator under the Act. This application was supported by the affidavit of Sri Vishwa Nath Dubey, Upper Division Assistant in Industrial Development Department, U.P., Lucknow. Thereafter an application No. 43683 of 1998 was filed by the State Government through Chief Standing Counsel on 24-7-1998 for listing the matter for orders for appointment of liquidator. An Application No. 44062 of 1998 was filed by the company on 27-7-1998 through its counsel Sri Shiv Nath Singh for winding up of the company and to appoint Official Liquidator as liquidator of the company along with affidavit of Padam Singh, Managing Director of U.P.C.C.I. Churk, Mirzapur.
4. Cement Workers Union (CITU) an 13 other trade unions filed a Writ Petition No. 15134 of 1998 challenging the order dated 19-2-1998 passed by AAIFR and the order dated 2-7-1997 passed by the BIFR. They filed an affidavit (A-12) in this company application to keep the proceedings in abeyance till the disposal of the Writ Petition. The State Government filed a reply to the aforesaid application filed by the Cement Workers Union in the form of Affidavit of Sri K.L. Meena, Special Secretary, Government of U.P. Industrial Development Department, Lucknow, for rejection the application to keep the winding up proceeding in abeyance on the ground that UPSCCL is incurring losses. In detailed objection in the form of affidavit he gave reasons for losses suffered by the company. In para 9 it was stated that UPSCCL has on its rolls, including casual muster roll 5300 workers and that the major reason for the sickness of the Sick Company were financial, productive, technical, raw material, managerial and marketing problems. In paragraphs 10 to 35 he spelled out the reasons of financial losses which included the old and completely worn/out factory of Churk plant. The second plant of the Sick Company at Dalla, Cement Factory was installed and commissioned in the year 1970-71. It was stated that dry process cement plant established by the company for clinker production at Dalla and Grinding unit commissioned in 1982, could never produce/ manufacture to its full capacity. The maximum production, was achieved only in the year 1986-87, of 10.34 lacs metric tone against the installed capacity of 16.80 lacs tones, which over the year have come down to approximately 2.2 lacs metric tones per year. The dry process plant was set up after taking huge amount of loan from financial institutions which the corporation failed to pay and that the bank and financial institutions have refused to give any further financial assistance to the company. The company was unable to met competition from private sector which manufacture about 90 per cent of the installed capacity of cement. In paragraphs 36 to 45 Sri K.L. Meena mentioned about the steps taken by the BIFR to explore the possibilities of rehabilitation. He stated that the workers union had given exaggerated statement of surplus assets based on the report of Chartered Accountant in pursuance of the orders of this Court in July, 1998 claiming Rs. 151 crores as surplus assets which is self contradictory to the stand of the workers union before the Board as well as before the High Court in the Writ Petition in which the workers unions have claimed surplus assets to be not more than five crores. In the writ petition the workers' union filed a fresh rehabilitation scheme in which the surplus assets were shown to be of 23 crores. In para 46 he stated that as the three units of the company were not able to comply with the prescribed standard of emission norms in its various sectors on which the Central Pollution Control Board on 16-6-1997 has issued directions under Section 5 of the Environment (Protection) Act, 1986, and directed the company to stop their operation in all their three units. In the same paragraph it was stated that the continuous running of the company is causing disastrous effect on the natural vegetation/inhabitants of the area. In paragraph 59, he referred to the case of Rohtas Industries Ltd., Dalmia Nagar in District Rohtas Bihar reported in 1986 (86) Company Cases, Page 1, in which the Apex Court entertained the writ petition during the pendency of the winding up before the Patna High Court and experimented with adopting various alternative schemes for rehabilitation of that industry with the help of the BIFR and after keeping the winding up proceeding in abeyance for years together, concluded that inspite of the best efforts the object to revive the company does not appear feasible and held that in these circumstances, the future course of action and while bringing end to the proceedings directed, the winding up proceedings before Patna High Court be resumed, Sri Meena concluded that in view of the facts and circumstances enumerated by him and in view of Rohtas Industries experiment, the Court may order winding up of UPSCCL rather than entertaining similar rehabilitation scheme, as were submitted before the Board and were not found viable by the Board.
5. In his aforesaid affidavit Sri K.L. Meena also submitted that since 1992 the State Government has directed sales tax deferment to the sick company for a period of 5 years with a benefit of approximately 50 crores as financial assistance which did not include latest payment of Rs. 11.25 crores given to the corporation as an aid for payment of wages/salaries to employees for a period of 4-1/4 months. The company is not paying the taxes, royalties and that no measure whatsoever, has been taken by the State to recover the same. It has been provided electricity and other facilities, for which the company is not making payment for the last several months. It was categorically mentioned that the State Government is neither in a position to invest hundred of crores rupees in the present sick company, and thus experiment without surety of rehabilitation of the company. He stated that the State Government had communicated to BIFR about the State Government's decision of not being in a position to invest huge amount of hundred of crores of rupees which was proposed by the Operating Agency; that the decision of the State Government was never reversed and that the State Government has not been in a position to further invest huge amount as required by the Operating Agency. At present there are no assets whatsoever, what to say about the surplus assets free from encumbrances of the company and all assets of the company are mortgaged with the financial institutions and banks, including the Industrial Development Bank of India, against the loans taken by the sick company. Neither the corporation nor the State Government has control whatsoever on the realization arising but of the assets, as first charge on these assets vests with financial institutions/banks. He thereafter submitted that fallacy in the report of Chartered Accountant based on the valuation of report of M/s. S.K. Ahuja and Associates, Kanpur and Valuation Report of A.F. Fargusan and Company, in which the findings were contradictory. It was mentioned that S.N. Singh and Company has further estimated figures of the assets and the justification to calculate value of the school building which are to run as Government Institutions and valuation of land are high in the backward area. This affidavit running into 113 paragraphs given by Sri K.L. Meena, Special Secretary, Industrial Development Government of U.P. summarized the position of the State Government and its objection to the rehabilitation proposals of the Cement Corporation Unit.
6. Writ Petition No. 15134 of 1998, was dismissed by this Court on 8-12-1999 with observations that in case the assets of company are sold, the workers will be given first priority in payment. The operative portion of the order is quoted as below :
"In the last, the learned counsel for the petitioner submitted that the workmen had been working in the sick unit. They are entitled to Wages till the winding up order is passed. This submission was also raised before the Board and it noted the submission in the meetings held on 26-9-1996 and observed as follows :
In case the State Government decide to wind up the corporation they should do so and pay all the dues of the labour. The present Government has different policy regarding sick P.S.Us as compared to the previous Government and the workers are hopeful that a favourable view will be taken in this case.
There is no reason why the workers be not paid their salary. In view of the above discussion the writ petition is dismissed against the recommendation of the Board dated 6-2-1997, and the order of the appellate authority dated 19-2-1998. The Writ Petition, in so far as the direction in the nature of mandamus commanding respondent No. 4 to make payment of all dues to the workmen for the period till today, is allowed. In case respondent No. 4 is not able to pay the amount on winding up of the corporation, the payment shall be made to the workers prior to making any payment to any person in accordance with Section 539A of the Companies Act, 1956. The writ petition, as against the other reliefs claimed in the writ petition, is hereby dismissed."
The Cement Workers Union and others filed Special Leave Petition No. 7796 of 2000, between Cement Workers Union (CITU) v. Board Industrial Finance and Reconstruction, against the orders of this Court which was dismissed by Hon'ble Supreme Court on 9-5-2000.
7. The workers also filed objections to the winding up of the company in this company petition. These objections were considered by the Court. After finding that the writ petition has been dismissed based on the same ground on which the objections were filed, the Court concluded that the opinion of BIFR does not suffer from any illegality. Accepting the opinion of BIFR the corporation was directed to be wound up by order passed on 8-12-1999, with a direction to the official liquidator to take appropriate action in accordance with law. A Special Appeal No. 38 of 2000 filed by Cement Workers Union and others against winding up order was dismissed on 31-7-2000.
8. The Statement of affairs of the company in pursuance of Section 454 of the Companies Act, 1956, on Form 157 verified by Sri Yashpal Sharma, the company secretary on 6-3-2000, was submitted to official liquidator with a copy to the Registrar of the Companies on 22-3-2000.
9. An application No. 11 of 2001 was filed by Allahabad Bank praying that the Court may exempt the properties, detailed in annexures 2 and 3 of the application for winding up/liquidation proceeding on the allegation that it had given loan and credit facility to the corporation and the company had hypothecated certain properties with it under an agreement dated 31-3-1981. The application was dismissed by the Court on 8-12-1999 with the following observations :
Application No. 11.
"This is an application filed by Allahabad Bank, praying that the Court may exempt the properties detailed in annexures 2 and 3 of the application from winding up/liquidation proceedings, on the allegation that it has given loan and credit facility to the corporation and the corporation has hypothecated certain properties with it under an agreement dated 31-3-1981.
The applicant claims to be secured creditor. A secured creditor is entitled to preference for realization of its amount under Section 529A of the Companies Act, 1956. The secured creditor cannot claim that the properties which have been hypothecated should be exempted from winding up. The winding up order is not to be passed in relation to a particular property. It consists of the whole assets of the company. The applicant has a right to submit its claim before the official liquidator. The application is accordingly dismissed."
10. Application (A-16) filed by employees (thirty seven in number) of the company (in liquidation) was also disposed of with the observation that these applicants can claim such relief for appropriate proceedings before the appropriate authority. Applications A-21 and A-22 filed by Balaji Trading Company was disposed of on 13-4-2000 by giving permission to the applicant to continue the arbitration case before the arbitrator Mr. Justice G.B. Singh (retired) in proceedings in O.S. No. 281 of 1999.
11. At this stage, the subject application No. 47788 of 2001 (A-31) was filed on 17-5-2001 by the State Government with a prayer to direct official liquidator for taking appropriate steps in the light of the order dated 8-12-1999 passed by this Court after giving due consideration, and considering the offer made by Grasim Industries Company, and IDBI, so that the liability of the company may be discharged/paid, and the interest of the labour and other staff of the cement corporation may be protected. It is opposed by Allahabad Bank in its application No. 50506 of 2001 filed on 24-5-2001 with the prayer that the application for permission to sell the assets of the corporation be dismissed.
12. The application filed by the State Government is supported by affidavit of Sri Hari Krishna, the Secretary, Heavy Industries, Government of U.P. Lucknow. He has stated that the official liquidator was required to take immediate steps after winding up order. However, no effective results have been achieved in pursuance of the directions given by this Court as such the State Government in order to assist official liquidator to expedite the matter and for ensuring compliance of Court's order dated 8-12-1999 and to save public money, and since the Labour Union and other staff of the U.P. State Cement Corporation Ltd., were continuously pressing for payment of its wages etc., published an advertisement in newspapers inviting tenders for taking over Cement Plants of the U.P. State Cement Corporation Ltd. In the said advertisement it was mentioned that company is being wound up by the High Court of Judicature at Allahabad, on the recommendation of BIFR, hence the said tender would be subject to the clearance by the High Court and BIFR. A copy of the advertisement made in the newspaper 'The Economic Times' dated 10-2-2001, and the newspaper 'Business Standard' dated 12-2-2001 has been filed as Annexure A-4. In the said advertisement the last date for the interested parties for submitting their bids was 31-3-2001 by 3.00 P.M. The State Government extended the last date for submitting bids with regard to aforesaid matter by 30-4-2002 to get worth while offers, and published it in 'Economic Times' on 31-3-2001. In the advertisement published in the newspaper the Government of U.P. announced/declared a number of reliefs and concessions to be granted by the State Government. It is submitted that the State Government adopted a very transparent process by duly advertising which make package of incentive very clear. Three Cement companies initially showed interest, however, finally only one company namely Grasim Industries Ltd. came forward and submitted an offer on 30-4-2001 which was otherwise also valid as per tender notice. The bid submitted by Grasim Industries Ltd. was in two parts, which was opened by the concerned committee constituted for the purpose. The note of the committee has been annexed as Annexure A-6, which shows that the committee consisted of following officials:
1.Commissioner Industrial Development - Chairman
2.Secretary, Small Industries Development - Member
3.Secretary, Finance Department - Member
4.Secretary, Heavy Industries - Member
5.Managing Director, UPSIDC - Member
The committee opened single tender on the stated reasons that the unit has closed production, its machinery is diminishing, five thousands and more employees are facing uncertainty and that such a big production capacity is suffering loss, and further that after two advertisements only one tender has been received.
13. The tender is in two parts namely qualifying offer of first part of Rs. 195 crores, towards settlement of dues of Banks and Financial Institutions and with employees, and part II of the said bid contains a proposal of Rs. 35 crores towards VRS scheme of the staff of State Cement Corporation Ltd. and Rs. 11 crores as over and above the amount given in the bid. The total offer of Grasim Industries Ltd. was does found to be of Rs. 241 crores. In para 15 of the affidavit it has been stated that the advertisement was made subject to sanction given by the High Court, and as such the Secretary, Heavy Industries along with communication letter sent by A.P. Singh, Industrial Development Commissioner/Principal Secretary, Government of U.P. personally met official liquidator on 3-5-2001, and tendered copy of the said communication along with other relevant documents. The official liquidator did not accept the said communication, and required it to be submitted before the Court. It has been stated that the communication of the State Government was to assist the official liquidator so that on one hand in compliance of the order dated 8-12-1999 passed by this Court should be ensured and the staff of U.P. State Cement Corporation, Financial Institution as well as public money can be saved. Paragraph 17 of the affidavit, relates to the dues of the financial institution. It is stated that the Secretary, Industrial Development Government of U.P. met the Chairman and Managing Director IDBL In this meeting it was indicated that the financial institutions will be willing to settle the dues against UP State Cement Corporation on payment of principal amount. In support of this averment the affidavit encloses a note of Secretary, Industries Development which has been marked as Annexure A-8. The said note is not enclosed with the original affidavit, instead minutes of the committee dated 30-4-2001, on the date of opening of the tender has been annexed with the affidavit.
14. Coming to the advertisement made by the State Government in 'Economic Times' dated 10-2-2001 and 'Business Standard1 dated 12-2-2001, it is necessary to quote the advertisement to understand the true nature of the invitation of offer. The advertisement is quoted as below:
U.P. State Cement Corporation
(A Government of U.P. Undertaking under liquidation) TENDER NOTICE FOR TAKE OVER OF A CEMENT PLANT
Government of Uttar Pradesh invites offer from interested parties for take over of U.P. State Cement Corporation, on the basis of two part bid offer.
First part of bid would contain an Unconditional Acceptance clearing the outstanding workers retrenchment benefits to all the workers and the one time settlement dues for financial institutions and B. The amount expected for this is Rupees One Hundred Ninety Five Crores. This would be qualifying offer part of the bid would be an offer and above the qualifying offer. IInd part of the bid of only such bidders be opened who have tendered unconditional acceptance of first part (qualifying bid).
The Highest Bidder of Part II would be awarded the tender immediately
Reliefs and Concessions
Government of Uttar Pradesh would be ready to :
1. Write off all past Government loans with interest of the company.
2. Write off all Electricity/Trade Tax/Royalty dues.
3. Offer Trade Tax exemption to the unit for Ten years.
4. Offer waiver of royalty dues for Ten years.
5. Renew the Lime stone leases in favour of the company.
6. Power load of the new plant would be sanctioned and required power supply ensured.
7. Electricity Duty Exemption would be granted on any captive power generation facility set up by the promoter for this plant.
Properties on Offer
Include the lime stone lease at Ninga & Kajrahat having over hundred million tonnes of lime stone deposits adjacent to the factory site. Report of Director of Geology and Mining regarding quantity and composition of stone shall be attached to the tender form. The existing plants at Chunar and Dalla and all other properties of Corporation are included in the offer, minus the land at Churk plant and lease of Gurma land which would vest the Government of Uttar Pradesh.
Legal Status of the Company
The company is under liquidation under the orders of Hon. High Court, Allahabad on the recommendation of BIFR. Therefore, the above tender would be subject to clearance of Hon. High Court and the BIFR.
Last Date
Interested parties must submit their part bids by 31 -3-2001 by 3.00 P.M. to the Secretary, Industries Development, Government of U.P. Room No. 423, Secretariat Annexe Bhawan, Lucknow-226, Phone No. 0522-239280, Fax: 0522-239235, e-mail: Harry @ upindia or epbup@satyam.net.in.
Tender papers
Tender papers and information memorandum about the company giving complete details of the assets by obtained from the above address on all working days on payment of Rs. 5,000 through a Bank draft in favour of U.P. Government Tender Form can also be downloaded from the internet from website www. upindia. or www.epbupindia.com and the requisite fee for the forms can be submitted along with the bid. Site inspection would also be arranged if required.
Earnest Money Deposit
The tendering party would have to submit their bids along with an earnest money deposit (refundable Rupees Five Crore in the form of a Bank draft) in favour of Uttar Pradesh Government, Lucknow.
15. The Memorandum of information (including guidelines for submitting of tenders) titled as invitation for offer for sale to U.P. State Cement Corporation marked as confidential and valued at Rs. 5,000 is enclosed as 'appendix 6' to the affidavit. The document gives the background, liabilities statements, history, details of the lease rights to be transferred, details of properties of the corporation, silent features and USP's of this offering, guidelines on submission of offers format for submission of bids and Annexures - Reports of Directorate of Geology and Mining on Kajrahat and Ninga Mines.
16. In the background it has been stated in the memorandum of information that U.P. State Cement Corporation Limited is State Government undertaking registered as a public Limited Company under the Indian Companies Act, 1956. The entire share capital is held by the Government of U.P. through the Governor of U.P. or his nominees. It has the largest installed capacity for manufacturing of cement. The four units of the company are situated at Churk, (wet process) commissioned in 1954 and 1962, installed capacity (i) Clinker 4.56 Lac MT and (ii) Cement 4.80 Lac MT; (2) Dalla (wet process) commissioned in 1971-72 installed capacity (i) Clinker 3.80 Lac MT and (ii) Cement 4.00 Lac MT; (3) Dalla (Clinker Unit) (Dry process) commissioned in 1983-84 installed capacity 8 Lac MT; and (4) Chunar (Grinding Unit) commissioned in 1983-84 with installed capacity of Cement 16.80 (Lac MT). In the Liabilities statement as on 8-12-1999 is shown as share capital of 68.28 crores and total of 879.98 crores towards loans and current liabilities. The break-up of these loans and current liabilities is given as below :
(i) Long term loan from FIs/Banks:
(a) Principal - 54.20
(b) Interest - 235.42
(ii) Working Capital Loans - 4.65
(iii) Loans from State Government - 165.80
(iv) Current Liabilities :
(a) Salaries and wages etc. - 106.64
(b) Electricity Dues - 110.70
(c) Outstanding Sales Tax - 67.10
(d) Royalty on Lime Stone - 20.10
(e) Suppliers payment etc. - 47.09
17. The offer of Grasim Industries Ltd. have been annexed to the application as 'Appendix 2'. This offer dated 30-4-2001. Reference Grasim Industries Ltd. as a Aditya Birla Group with turnover for the year ending March 2001 to be more than 5,000 crores. It encloses and demand draft dated 27-4-2001 drawn on State Bank of India payable at Lucknow for Rs. 5 crores and accepts to pay to the Government of Uttar Pradesh, to clear the outstanding dues, retrenchment/VRS benefits to all workers of the corporation and to enter into one time settlement by the Government of U.P. with the financial institution and banks, on the outstanding long-term loans of the corporation, as detailed in Memorandum of Information and offers a total amount agreed towards liability amounting to Rs. 195 crores. The annexure to the bid gives the condition upon the offer. These conditions requires sale transfer of the undertaking to be passed within six weeks or the time mutually agreed from the date of the bid; all claims of secured and unsecured creditors, employees, officers and executors, wages, arrears in PF and ESI retrenchment compensation etc. to be paid out of the consideration price and no liability beyond the bid amount and further the bidder did not assume any obligation for payment of any claims for secured creditors or unsecured creditors, employees, officers, executors etc. including sales tax, income-tax, excise, royalty tax and all other taxes and any other dues of Central Government and State Government of Indian Railways beyond the bid offer Confirmation from workers, employees and officers or any staff or contract or subject to the re-employment, lease and extension of lease for limestone as listed in Schedule IV of the Memorandum to be granted/renewed in the name of the bidder on the same terms and conditions on which it was granted to UPSCCL without liability of payment of any arrears or other dues and the agreed consideration to be paid as full and final payment with no liability if arises in future beyond the consideration. The final order of the High Court in the condition required to be fully effective and binding and in case any appeal or with or special leave petition, stay order has been understanding to have deemed to have become final until appeal, with or SLP is rejected and the time for filing appeal, writ or SLP has expired. The bidder required evidence/representation from the Governor of U.P. that all dues payable to U.P. Government shall be waived. Sales-tax exemption on sale without any ceiling of amount will be available to the bidder for a period of 10 years from the date of handing over possession and royalty tax exemption on limestone will be available to the bidder for a period of 10 years in case any land has been acquired the permission of State Government under Section 44A of the Land Acquisition Act, 1984 for sale of transfer of the property in favour of the bidder and no additional/ further payment shall be required to be made or if the land has been required by private purchase by UPSCCL to arrive and clear and marketable title free from encumbrances to the land and its weight to transfer the same without requiring any permission/approval or sanction of any statutory or other regulatory agency and that all taxes including land revenue shall be paid by UPSCCL. The bidder further required evidence of all these payable to the bank and financial institutions, all guarantees, warranties and indemnities of the suppliers of machinery is continued to the value to the bidder, evidence that electricity company, water works and all other utilities shall continue to provide on same terms and conditions. The conditions further continued up to 20 items which need no require further elaboration. In fact the bidder required all reliefs and concessions, guarantees and no liability towards any financial institutions, State Government, Government Department or employees. One more significant condition No. 15, required that on the sale, the bidder has assumed that there remained no amount payable on the deeds of transfer and sale or assets or any other documents and vacant possession of the land, houses, colonies, plant and other assets be given. They also required copies of title deeds of land including copy of mining leases including electricity duty exemption on captive power plant and railway sidings/ agreement or arrangement with UPSCCL and India Railway authorities should continue to Grasim silent assets.
18. Allahabad Bank has filed Civil Misc. Application No. 50568 of 2001 on 24-5-2001 with a prayer that permission of sale of assets of the corporation be dismissed with costs. It is stated that Allahabad Bank is secured creditor of UPSCCL and the State Government of U.P. is guarantor of the whole extent of the debts. The Bank filed claim petition against UPSCCL and State Government of U.P. as guarantor for recovery of Rs. 87,15,71,259.72 as on 22-4-1999 calculated up to that date in the Debt Recovery Tribunal, Jabalpur being claim petition Original Application No. 149 of 1999 which has been transferred to Debt Recovery Tribunal, Allahabad and registered as Transfer Application No. 1464 of 2000. Notices have been served on the Corporation and the State Government but they have not filed and written statement and in the mean time winding up order was made on 8-12-1999. An application for injunction against the Corporation and the State Government for transferring, alienating or otherwise dealing with or dispossessing off any property and assets, is pending before the Tribunal. Notices have been sent to the Chief Secretary of the Government of U.P. and the Corporation, but they have not appeared. They have not filed any counter affidavit and have neglected to appear in the matter, and have instead filed an application for permission/approval for the sale of the assets. It has been submitted that provisions of the Central Act No. 51 of 1993, override the provisions of the Companies Act, 1956, conferring exclusive jurisdiction in respect of the adjudication of the claim and execution of the final order on the Tribunal and the Recovery Officer in respect of the debts payable to the bank, and that there can be no interference of the Company Court in respect of payment due to bank payable before Debt Recovery Tribunal. It is lastly alleged that the application of Government of U.P. and Corporation is mala fide and is not maintainable.
19. Arguments were heard on 25-5-2001. The matter was thereafter directed to be heard after vacations. On 25-7-2001 the Court called for report of the official liquidator with regard to handing over of the possession of the plant and machinery and other assets after preparing inventory. Directions were given that the official liquidator and his staff will be provided security for taking over the possession of the property of the company. The Chief Standing Counsel stated that he is in a position to hand over inventories to the official liquidator.
20. On 6-8-2001, the Court was informed that the financial institution which had finances the company (in liq.) held a joint meeting on 2-8-2001 to consider the proposal of the Government of Uttar Pradesh for one time settlement. The meeting which was attended by officials of Allahabad Bank, State Bank of India, IDBI and the officials of Government of Uttar Pradesh was adjourned on the request of Allahabad Bank and State Bank of India to consider the proposals. The process of taking possession of the assets began on 22-7-2001. On the same date, the court issued notices to all the officers and Workers Union who were petitioners in Civil Misc. Writ Petition No. 1534 of 1998 decided on 8-12-1999, to assertion their views on the application (A-30) filed by the State Government. On the next hearing the official liquidator reported that possession of the units at district Mirzapur and Sonbhadra has been taken. The District Magistrate, Mirzapur has accepted the supurdagi of the assets. Mr. V.K.S. Chaudhary, Senior Advocate, appearing for the Allahabad Bank submitted that he has not concluded his preliminary objection to the application filed by the State Government. The State Bank of India reported that the consortium meeting had not reached any decision and that the State Bank of India is not inclined towards the offer of the State Government made to them through IDBI. An application was filed by Bharatpur Nutritional Products Ltd. (Dalmia Industries Ltd.) for staying the consideration of the application filed by the State Government for sale of assets to Grasim Industries Ltd. On this Court observed that injunction order dated 25-5-2001 directing that no sale or transfer of possession of assets of the UPSCCL (including the mortgaged assets) will be made without the leave of the Court making it clear that this injunction will not operate against Recovery Officer of the DRT, if and when the claim of the bank is decreed, was already operative. The Cement Workers Union filed an application through counsel Sri Saumitra Singh supported by affidavit of Sri Laxmi Kant Shukla, representing 15 unions a list of which was included with Vakalatnama. It was found that notice to the employees and workers were dispatched only on 23-8-2001, and thus the matter was adjourned to 19-9-2001. Then the functioning of this court was effected by prolonged strike of Advocates for 75 days, on the issues of a bench in Western U,P. The Court, however, functioned and heard matters, in which personal appearance were put by the litigants. The court has held proceedings in this matter on 10-9-2001, 20-9-2001, 22-9-2001, 3-10-2001, 29-10-2001, 30-10-2001 and 5-11 -2001. In between the official liquidator submitted his report Nos. 113, 114 and 115 of 2001 with regards to various matters, including application of State Government to consider the offer made by Grasim Industries Ltd. (report No. 114 of 2001), report No. 114 of 2001, was filed in compliance of direction of the Court to find out the views of State Government on possibility of sale of assets by advertising for exploring higher offer made to the official liquidator and report No. 115 of 2001, for giving direction to the District Magistrate, Principal of College, schools, hospitals, employees, workers and officials to deposit the rent of the building occupied by them giving authority to District Magistrate to realize the rent.
21. In pursuance of the orders passed by this Court on 20-9-2001, the official liquidator submitted his report No. 129 of 2001 in which the report to the Court that in response to his letter dated 9-1-2001, sent to the State Government, he has been furnished a reply by the Secretary, Industrial Development Department of Government of U.P. by Fax Message dated 30-10-2001. In this reply the Government of U.P. intimated that it does not support the move for re-tendering through official liquidator due to the reasons, namely, (1) that it will unnecessarily delay the revival of the unit through privatization; (2) idea is to transfer the unit concern and not merely disposal of the assets; (3) there is no guarantee for re-tendering through official liquidator will get a higher bid, and (4) that other institutions have also to agree to this move, and that the reliefs and concluding that the concessions offered by the Government of U.P. can remain valid for the moves, only if the points mentioned above are taken care of. The Court found that the submission of Sri Ashok Mehta, the learned Chief Standing Counsel were not in consonance with the communication sent by the State Government in writing to the official liquidator. The matter was pending since 17-5-2001, based on assumption that the Banks and financial institutions have agreed to one time settlement which was one of the basic conditions of the invitation of offer but inspite several adjournment the time the Banks did not come out with any categorical statement with regard to one time settlement. In the meantime the employees were facing several difficulties and complaints were received with regard to water and electricity supply, transportation, staff of schools, teachers, supply of essential drugs in hospitals. It was made clear that the Government Officials are responsible to provide these facilities inspite of the fact that the company had. been wound up, and that the citizens of this country cannot be deprived of basic amenities on the ground that they are employees the erstwhile wound up Government company. Serious concern was expressed on the complaints against to executing officers, who trying to occupy and to put the properties of the company (in liquidation) to be misused by removing air-conditioners furnitures etc. from the offices and guest house buildings. The standing counsel assured the Court that these complaints were looked into by the State Government. On 22-11-2001, the chief standing counsel filed report of Sri N.K. Agarwal and Associates, Kanpur with regard to revaluation of the land, building, plant and machinery of the company (in liquidation).
22. The State Bank of India filed application giving terms of compromise on which the State Bank of India has agreed to accept compromise proposal. The application was not supported by affidavit of any officer of the bank and it was submitted that the matter is under consideration with the Board of Director of State Bank of India. Adjournments were sought to file an affidavit supported by approval of the Board of Directors of the Bank. The Court directed that the copy of application filed by State Government shall be circulated to the official liquidator and other financial institutions and Allahabad Bank inviting their comments. The learned chief standing counsel was directed to produce the entire record pertaining to invitation of offer and acceptance of offer by the committee constituted by the State Government for perusal of the Court. On 4-12-2001 an affidavit of Sri Hemant Bansal, Chief Manager of State Bank of India, Ghosia, District Sant Ravidas Nagar was filed confirming the contents of application filed on 29-11-2001 and stating that the condition of settlement of the matter with the Bank are subject to the approval by the Board of State Bank of India and it will take about two weeks time for the Bank to consider the matter. The counsel appearing for the State Government informed the Court that the Secretary Industrial Development has gone abroad and is likely to return back on 6-12-2001 and thus the matter needs re-examination of the proposal submitted by the State Government.
23. The arguments were heard on 10-12-2001, 11-12-2001 and thereafter on 14-12-2001. Upon hearing counsel for the State Government and after examining the record which contained a note submitted to the cabinet for approval, the court found, that inspite of all the departments of State Government including the Department of Finance, Sales-Tax, Electricity and Law, opposed for the move of rehabilitation on the ground that the departments shall not been able to bear any further financial burden.
24. A copy of the note put up before the cabinet was placed by the chief standing counsel and was taken on record. A perusal of this note shows that it was prepared after seeking comments of the Department of Law Industrial Development, Sales-Tax Finance and Electricity. The Principal Secretary, Legal Remembrance, Government of U.P. advised Government of that official liquidator has been appointed through High Court and thus to remove his appointment proceedings should be undertaken under Section 166 of the Companies Act, 1956, and only thereafter according to proposed procedure, the assets of the UPSCCL can be transferred by privatization. He put a query that there is no clarification as to how 254 acres of land and building at Chunar and 564 acres of land at Gurma is left from sale, and it was proposed that the position should be made clear before the cabinet and the decision of the cabinet be obtained. The tax department proposed that if the rehabilitation is to be made by privatization the department has no objection, to exempt the arrears of trade tax on 67.10 crores, but it did not agree for giving 10 years rehabilitation for trade tax as grounds that before the date of approval by the High Court there is no justification to give 10 years rehabilitation. A trade tax is an indirect tax in which the seller collects the tax from purchaser and deposits in the Government Treasury. This benefit will not be passed on to consumer public and shall be confined to entrepreneur. It was recommended that such incentive is against the agreement with the Central Government and will amount to giving unlimited rights to a private entrepreneur which will exhaust the raw material in the limited period. It found that at present all units are exempted from trade tax on purchase of raw material, and thus the benefit of exemption on finished product is not justified as it will also come in the way of application of VAT system. Industrial Development Commissioner opposed the exemption of arrears of trade tax and full exemption of 10 years on the ground firstly that in the Chief Ministers meeting it was decided that no such benefit will be given to any industry and if such benefit is extended the Central Government may stop giving assistance to such State Government. Secondly, there is no justification to give 10 years exemption from trade tax and from registration fees as there may not be difficulty in selling unit without giving such exemption. Thirdly he stated that exemption may discourage efficiency of sale of cement in the State and that the amount of profit to the promoter which shall not be estimated. He said that this profit can be somewhere between Rs. 300 to Rs. 3000 crores. According to him information regarding the maximum production of cement has not been given by the Industrial Development Department. According to trade tax and Registration Department this will be upto a minimum of Rs. 250 crores in a year on which the promoter shall get benefit of about 30 crores in a year and in 10 years which will amount to Rs. 300 crores, and in case the promoter is not put to any restriction on expansion, they will not to dale 12 per cent, the objectivity price may increase capacity after 10 times which will induce to other promoters to give such exemption, and requested for clarification on certain issues, namely, whether the exemption will apply only to finished goods and whether the expansion of the capacity will be permitted. Many other querries were made with a proposal that in case the promoters of UPSCCL are to be exempted, it will require amendment on Trade Tax Act, forgiving such exemption to all the units to be privatized by the State Government and suggested that a minimum exemption should be fixed in rupees rather than period.
25. The Finance Department in their comments observed that the State Government has already taken a decision and communicated it to the BIFR and the Hon'ble Court that it cannot bear any further financial liability in the unit. BIFR found that the rehabilitation is not possible. Liquidator was appointed on the opinion from BIFR and thus it will not be proper to obtain an order from the High Court for taking back the property from official liquidator, and to offer it for privatization. It commented that unless a proposal of rehabilitation is concerned for all assets and the decision is taken at the highest level and the State Government takes approval of BIFR, the application cannot be filed before the High Court. The financial department made a significant comment on clause four of the note to be submitted to the cabinet to consider to remove liquidator and to offer the industry for privatization for seeking approval of the High Court. It did not agree with the proposal on the ground, firstly that in the Chief Minister's Conference. It was agreed that no such exemption is given to any industry. The financial department, however, agreed with a note of Industrial Development Commissioner to the extent that the proposal shall not have any effect on the liquidation proceedings which may continue. The liquidator is required to find out the purchasers of the assets of the company (in liq.) and that the State Government may take responsibility of finding out the purchaser only to the extent to put mineral assets of the State to their utilization, and for early payment of the dues of the workers which may take a long time without putting any liability or responsibility on the State Government.
26. U.P. Power Corporation submitted its note informing that there is a liability of 110.70 crores to be paid by the company (in liq.) to U.P. Power Corporation. If the unit is rehabilitated by privatization, it will put development of the capacity of cement production and since the rate schedule for this industry is higher than other category of consumer, it agreed in the interest of future realizations, with the proposal to exempt the electricity dues of 110.70 crores, while putting forward to the difficult, to the effect that the financial condition of the power corporation is unsatisfactory and thus it will not be possible to give such exemption, and offered the only option that the dues to be paid by the U.P. Power Corporation to the State Government be reduced to the extent of the dues of the UPSCCL. The Electricity Department, in fact tried to off set their liability to the State Government by reducing the amount of dues to be paid by UPSCCL. It was pointed out that under the U.P. Electricity Reforms Act there is no provision that exemption be given for any special project, and that any assurance to the promoters may be offered for exemption to be provided on electricity duty on the captive generation by the promoters for a maximum period of five years.
27. The Court finds that all the departments consulted, discouraged reliefs and concessions. Clause 4(iv) of the proposal put by the Principal Secretary and Industrial Development Commissioner, provided that the liquidator be removed and the industrial capacity be offered for privatization after obtaining the sanction from the High Court. One of the factors taking into consideration was to effect that it may take more than 20 years for the sale of the assets by the Liquidator causing continuing losses to the assets of the corporation as well as dues of the workmen.
28. A perusal of the aforesaid note which was made part of the record, and it was stated to be accepted by the cabinet, shows that the Principal Secretary and Industrial Development Commissioner proposed the following reliefs to be given by the State Government.
(i) Trade Tax
Rs. 67.10 crores
(ii) Limestone Royalty
Rs. 20.10 crores
(iiii) Electricity dues to UP Electricity Corporation
Rs. 110.70 crores
(iv) Working capital given by the State Govt. to the Corporation as debt.
Rs. 65.80 crores
Rs. 363.70 crores
It proposes that new promoters take guarantee for the following:
(i)
Arrears of wages, provident fund, gratuity and retrenchment benefit (two weeks pay with every year of service rendered)
Rs. 135 crores
(ii)
Payment of principal amounts of Financial Institutions by OTS
Rs. 60 crores
Rs. 195 crores
It was further proposed that 254 acres of land, building and factory at Churk and 564 acres of land at Gurma will not form part of the assets for sale as limestones is not available at these places and that its ownership will remain with the State Government. It was found these assets is about Rs. 30 crores which can be used for Government purposes and that its decision shall be taken by the State Government separately.
29. The substance of the proposal was to remove official liquidator and to offer the assets of the company (in liq.) to a promoter by privatization after offering the reliefs and concessions to the extent of 663.70 crores, by guarantee offer of only 195 crores and by excluding 254 acres land building and factory at Churk and 564 acres at Gurma valued at about 30 crores. Further reliefs and concessions offered were ten years exemption from trade tax, supply of electricity for 3 years on fix electricity tariff exemption on electricity duty on captive power generation and peaceful possession of unit to the new promoters.
30. Section 466 of the Companies Act, which is quoted as below :
"Section 466. Power of Court to Stay winding up.--(1) The Court may at any time after making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings either altogether or for a limited time, on such terms and conditions as the Court thinks fit.
(2) On any application under this section, the Court may, before making an order, require the Official Liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application.
(3) A copy of every order made under this section shall forthwith be forwarded by the company, or otherwise as may be prescribed to the Registrar who shall make a minute of the order in his books relating to the company."
31. The Principal Secretary and Legal Remembrancer UP had advised to adopt procedure under Section 446 of the Act. Instead of applying under Section 466 of the Companies Act for standing liquidation to consider the proposed rehabilitation of the unit the State Government has made an application to this Court, after inviting the offers for consideration of the sale of the unit to the only offered Grasim Industries Ltd.
32. The State Government, therefore, against all opposition from all its department accepted recommendation of the Principal Secretary and Industrial Development Commissioner to invite offers for sale of the unit as a going concern. During the course of arguments it was repeatedly put to the Advocate General who appeared on second and third January, 2002, to support the application whether the State Government is making its submissions in support of the prayer under Section 466 or it is making an application to assist the official liquidator in sale of the assets. After seeking instructions, Sri R.P. Goel, Advocate General, made a categorical statement that he does not propose to press Section 466 in support of his application and that it should be treated an application to assist the official liquidator in disposal of assets under Section 457 of the Companies Act, 1956.
Before the Court considered the merits of the application (A-30) filed by the State Government in the aforesaid background, it is necessary to consider the objection of the Allahabad Bank.
33. Allahabad Bank is a secured creditor and that all the assets of the Corporation, have been mortgaged and hypothecated with Allahabad Bank on 22-6-2001. It filed a claim petition against the company (in liq.) and its guarantor on 22-4-1999 for recovery of Rs. 87,15,71,259.72 calculated on date before the Debt Recovery Tribunal, Jabalpur as Original Application No. 149 of 1999 which has been transferred to the Debt Recovery Tribunal at Allahabad and has been registered as Transfer Application No. 1464 of 2000 between Allahabad Bank v.U.P. State Cement Corporation. An injunction application filed by the Allahabad Bank on 26-2-2000 is still pending. It has objected to the application filed by the State Government and has prayed that the application may be dismissed with cost. The State Bank of India has filed application (A-44) dated 12-7-2001 with the same prayer to dismiss application filed by the State Government of sale of assets of the company (in liq.) to Grasim Industries Ltd. on the ground that the applicant being a secured creditor has first charged over all the assets of the company (in liq.) and that the sale proceeds receive therefrom are liable to be adjusted towards the dues of the State Bank of India. It is submitted in the application that the State Bank of India along with the Industrial Development Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India Ltd., Life Insurance Corporation of India Ltd. and Allahabad Bank granted a term of Rs. 4700 lacs in a consortium of the company (in liq.). Share of each member of the consortium has been detailed as below:
(i) IDBI
Rs. 230 lacs
(ii) IFCI
Rs. 300 lacs
(iii) ICICI
Rs. 400 lacs
(iv) LIC
Rs. 700 lacs
(v) State Bank of India
Rs. 500 lacs
(vi) Allahabad Bank
Rs. 500 lacs
Total
Rs. 4700 lacs
34, A joint mortgage was created as security towards the aforesaid term loan in respect of the fixed assets of the company (in liq.) in favour of the aforesaid financial institutions and bank on pan passu basis and joint security documents were executed between the borrowers and the creditors. First charge was created over all the hypothecated movable asserts present and future including uncalled capital of the company (in liq.) in favour of State Bank of India by executing the agreement dated 31-3-1981. A general power of attorney in favour of the State Bank authorizing to transfer the assets of the company (in liq.) in addition to above term loan facility, to grant working capital loan the State Bank along with Allahabad Bank formed a consortium for the said purpose on execution of an inter se agreement dated 18-3-1991 executed between the said two banks which were supplemented by an additional agreement dated 1-12-1992. Following credit facilities were granted towards the working capital against hypothecation namely, stocks of raw material, stocks in process, semi-finished and finished goods, stores and spares bills receivable and book debts and all other movables both present and future :
(i)
Cash credit hypothecation Ltd.
Rs. 250
(ii)
Letter of credit
Rs. 195 lacs
(iii)
Bank guarantee limit
Rs. 55 lacs
Total
Rs. 500 lacs
A working capital consortium agreement dated 18-3-1991, Joint Deed of hypothecation dated 18-3-1991 creating the first charge on all the movable assets of the company as specified in the schedule, was executed. The charge over the fixed and current assets of the company was registered in the office of the company in respect of term loan facility and working capital facilities separately. The application has enclosed the aforesaid documents. The agreement dated 31-3-1981 power of attorney agreement between the Banks dated 18-3-1991 and supplementary agreement dated 1-12-1992 working capital consortium agreement dated 18-3-1991, a joint deed hypothecation certificate dated 18-3-1991 and the charge certificate issued by the registrar of the company. The title deeds of the company were deposited with the Industrial Development Bank of India which was the lead Bank by way of equitable mortgage. A declaration and undertakingdated 8-5-1994 has also been given by the company regarding joint mortgage. The Government of U.P. guaranteed the above loan by its letter dated 22-10-1980 and 23-12-1991 and also executed guaranteed agreement dated 23-12-1991. To secure credit facilities towards the working capital a second charge over all the immovable properties mortgaged in favour of the State Bank of India and other members of consortium under term loan was also created. After the company (in liq.) was unable to pay its dues and BIFR recommended for winding up of the company and the company was recommended for winding up the State Bank of India filed an application for Rs. 62,68,50,394.53 with pendente lite and future interest at the rate of 17.75 per cent p.a. with quarterly rests before the Debt Recovery Tribunal at Jabalpur which was registered as O.A. No. 249 of 1999 and was transferred and is pending before the Debt Recovery Tribunal at Allahabad. It is alleged that the total dues of State Bank of India as on 30-6-2001 comes to Rs. 69.48 crores approximately. The State Bank of India has stated that before inviting the offers for sale the State Bank did not consult with the Bank. Both Allahabad Bank and State Bank of India have submitted that the provisions of Recovery of Debts Due to the Banks and Financial Institutions Act, 1993, override the provisions of the Companies Act, 1956. Sections 17 and 25 of the Act confer exclusive jurisdiction in respect to claim and execution of the Final order of the Tribunal and of the Recovery Officer in respect of the debts payable to the Bank and that the Company Court cannot interfere in respect of the debts due to the bank pending before Debt Recovery Tribunal, Allahabad. It is further submitted that the State Government is not entitled to sell the assets of the company to any purchaser or sale proceeds be deposited in the account of the State Bank towards the liquidation of its dues, failing which the bank will suffer irreparable loss and injury. In the statement of affairs under Section 454 of the Companies Act, the Directors of the Company (in liq.) have admitted liability of Rs. 258.75 crores to financial institutions and bank and Rs. 106.64 crores towards the dues of employees whereas the total assets of the company (in liq.) have been stated to be worth Rs. 330.42 crores.
35. Sri Ashok Mehta, Chief Standing Counsel appearing for the State Government submits that in the present case winding up proceedings are being taken under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985 read with Companies Act, 1956. The virus of the Sick Industrial Companies (Special Provisions) Act, 1985 has been upheld by Madras High Court as well as Supreme Court in J.M. Malhotra v. Union Bank of India [1997] 89 Comp. Cas. 600 (Mad.) and V.R. Ramaraju v. Union of India [1997] 89 Comp. Cas. 609 (SC). Section 34(2) of the Recovery of Dues to the Banks and Financial Institutions Act, 1993 provides that the provisions of the Act shall be in addition to and not in derogation of the Sick Industrial Companies (Special Provisions) Act, 1985 in the case of Allahabad Bank v. Canara Bank AIR 2000 SC, 1535, the Court has taken into consideration the contention that Section 34(1) give over-riding effect to the provisions of the Act as provided in Section 34(2) amended by Ordinance No. 1/2000, proceedings saves only six statutes from the purview of Section 34(1), The Companies Act, 1956 is not one of them. It is submitted that the judgment in Allahabad Bank's case (supra) is not applicable in the proceedings arising out of Sick Industrial Companies (Special Provisions) Act, 1985. And that since the present proceedings of winding up are under Section 20(2) of the Act of 1985 read with Companies Act, 1956, the ratio of the judgment is not applicable. In the alternative it is submitted that the Act of 1993 gives jurisdiction to decide for recovery of their debts and that the Tribunal cannot pass any winding up order or take proceedings to liquidate the company, and thus winding up proceedings and any exclusion can only be proceeded with in accordance with the Companies Act, 1958. The Recovery Officer under 1993 Act may apply to the Court in whose custody (including Company Court) the money belonging to defendants for payment in accordance with Act of 1993 is available and thus proceedings for sale of assets, under the Companies Act are not barred by the aforesaid Special Acts.
Both Sri V.K.S. Chaudhary appearing for the Allahabad Bank and Sri Ashok Mehta, Chief Standing Counsel appearing for the State Government, have both relied upon Allahabad Bank's case (supra) in support of their contention. In the said case the dispute was between two nationalized banks. Allahabad Bank had obtained a money decree against M.S. Shoes (East) Co. Ltd. from the Debts Recovery Tribunal and Canara Bank's claim as a secured creditor was pending before same Tribunal and against the same company. The Company Judge acts exercising of power under Sections 442 and 537 of the Companies Act in a winding up petition by Ranbaxy Ltd. stayed the sale proceedings taken out by Allahabad Bank before the Recovery Officer under 1993 Act. The applications for winding up were pending, and no winding up order had been passed, nor any provisional liquidator was appointed as contemplated by Section 446(1). It was submitted by the Canara Bank that Allahabad Bank is to seek leave of the Court under Companies Act, 1956, and that the Company Court can stay and proceedings under Sections 442 and 537 for the purpose of deciding the priorities in the even of a winding up order, or other order appointing a provisional liquidator being passed under Section 446(1) of the Companies Act, 1956. After the decree in favour of Allahabad Bank, some properties of the company were sold by the Recovery Officer and it was contended that the Tribunal can deal with the appropriation of sale proceeds in respect of sales of the company properties on the question of Allahabad Bank and that the appellate atone is entitled to all the sums so realized. The Supreme Court after dealing with the arguments and going through the provisions and inter-relation to both the acts namely the Companies Act, 1956, Recovery of Debts due to Bank and Financial Institution Act, 1993, held that the jurisdiction of the Tribunal with regard to adjudication under 1993 Act is exclusive. After the liability of the defendant is adjudicated, it has to issue certificate under Section 19(22). Section 18 of the Act ousts the jurisdiction of any other court of authority which would otherwise have had jurisdiction but for the provisions of the Act. The exclusion does not apply to the jurisdiction of the Supreme Court or of the High Court under article 226/227 of the Constitution of India. The provision of Section 34(1) of 1993 over-rides other laws to the extent of inconsistency and thus prescription of an exclusive Tribunal both for adjudication is a procedure clearly inconsistent with realization of these debts in any other manner. No other court of authority muchless Civil Court or the Company Court can go into these question namely adjudication of the liability of the defendant and the execution of the decree. The Supreme Court held in para 50 that at the stage of adjudication under Section 17, and execution of the certificate under Section 25, the provisions of the RDB Act, 1993 confer exclusive jurisdiction on the Tribunal and the Recovery Officer in respect of debts payable to bank and financial institutions and there can be no interference by the Company Court under Section 442 read with Section 537 or under Section 446 of the Companies Act, 1956. In respect of the monies realized under the RDB Act, the question of priorities among the banks and financial institutions and other creditors can be decided only by the Tribunal under Act of 1993, in accordance with Section 19(19) read with Section 529A of the Companies Act and in no other manner. The provisions of the RDB Act, 1993 are to the said extent inconsistent with the provisions of the Companies Act, 1956, and the latter Act has to yield to the provisions of the former. This position holds goods during the pendency of the winding up petition against the debtor Company and also after a winding up order is passed. No leave of the Company Court is necessary for initiating or continuing the proceeding under the Act of 1993.
36. The Supreme Court considered the distribution of money to be done by the Tribunal and whether the provisions of Section 73, C.P.C. and Section 529(1) and (2) and Section 530 court also apply apart from Section 529A to the proceedings before the Tribunal under the Act of 1993, and whether in view of provisions of Section 19(2) and 19(1) as introduced by Ordinance 1 of 2000 the Tribunal can permit Allahabad Bank to appropriate the entire sale proceeds realized to the limited extent restricted by Section 529A. It also examined whether secured creditor like the Canara Bank which had not yet got decree in its favour could claim under Section 19(19) any part of the realization made by the Recovery Officer, difference between the cases were the secured creditors opts to stand outside the winding up and where he goes before the Company Court. It was held that in respect of such realization there are two class of secured creditors namely those who desire to go before the Company Court, and those who would like to stand outside the winding up. The first category of secured creditors who by relinquishing their security in accordance with the insolvency rules under Section 529, go before the official liquidator to prove their debts, and in that event rank with unsecured creditors. The other class of creditors are those secured creditors who stands outside the winding up to realize their security. These creditors in certain circumstances can go before the Company Court or Tribunal and claim priority overall other creditors for realization of their money, like in the Company Court. This limited priority declared in Section 529A(1) is restricted only to the extent specified in Clause (b) of Section 529A(1) i.e., confined to the workmen's portion as defined in Section 529(3)(c), and to that extent such secured creditors who stands outside winding up can come up before the Tribunal and claim priority over all creditors, by virtue of Section 529A(1)(b). Supreme Court found that the Canara Bank has not made it clear whether it wants to come in the category of those creditors who wants to remain outside the winding up. The Canara Bank had not obtained any decree and thus it could not claim any defence at that stage.
37. In a winding up petition an official liquidator was appointed and had taken custody of the assets of the company after preparing an inventory in the presence of secured creditors on an application filed by some other Bank claiming to be secured creditor before the Debt Recovery Tribunal, an Advocate Commissioner was appointed who required the official liquidator to appear before him and upon his failure moved before the Tribunal on which an order was passed by the Tribunal directing the Advocate Commissioner to take inventory of the company assets and in case of non-cooperation by the official liquidator to take assistance of the police to break open the locks.
The official liquidator filed an application on which the company referred the matter to a Division Bench. It was held in this case by Andhra Pradesh High Court in Pannar Paterson Limited v. State Bank of Hyderabad [2001] 106 Comp. Cas, 338 that by reason of Section 456, a legal fiction is created by the deeming provision contained in Section 456, and the assets of the company are under custody of the Court from the date of the order of the winding up of the company. The Debt Recovery Tribunal may have exclusive jurisdiction for adjudication and execution but it is another thing to say that such jurisdiction has to be exercised in a particular manner. Although the Tribunal has jurisdiction to be exercised having regard to the provisions laid down therein, the Tribunal is subject to the supervisory jurisdiction of the Court. The jurisdiction of the Tribunal for adjudication and the right of execution as against the Company Court has been determined between Allahabad Bank v. Canara Bank but not the mode of recovery. The mode and manner laid down for recovery of the debts due to banking or financial institutions must be adhered to having regard to the provisions contained in Rule 31 of the second schedule to the Income-tax Act, 1961. Even otherwise when the property is in custody, leave of the Court having plenary jurisdiction, keeping in view of the principles adumbrated in order 40 of C.P.C. must be obtained and that such leave was also necessary having regard to Section 10 of the Companies Act, 1956, and in particular the fact that the High Court exercised power of supervision under article 227 of the Constitution of India over its Tribunal and thus the Advocate Commissioner was required to obtain leave of the Company Court. Chief Justice Satyabrate Sinha speaking for the bench of Andhra Pradesh High Court, held that the judgment in Allahabad Bank v. Canara Bank was not the authority for the proposition for which the Court was concerned in that case held as follows :
"The liquidator or a provisional liquidator as the case may be is directed to take in to his custody or under the control the property, effects and actionable claims, as the company is not appears to be entitled to by reason of the provisions contained in Section 456, there cannot be any doubt whatsoever that the leave of the Court must be obtained."
38. In the present case we are concerned with the facts that the company (in liq.) was wound up on 8-12-1999 and that the official liquidator attached to this Court has been appointed and is functioning as liquidator of the company. Allahabad Bank and State Bank of India are secured creditors and both these banks have filed their claim petitions against the company (in liq.) which are pending before the Debt Recovery Tribunal, Allahabad. Their claims have not been adjudicated so far. Both these banks have not exercised their option to remain out side the winding up proceedings. The Debt Recovery Tribunal have exclusive jurisdiction under Act of 1993 for adjudication and thereafter recovery of such adjudicated amount and that the leave of the Court is not required to continue either for adjudication or recovery. The official liquidator is, however, not required to wait. He can proceed with the sale of the assets of the company under Section 457(1)(c), with approval of Court. There is no statutory bar or restriction applicable to the official liquidator under the provisions of the Recovery of Debts due to the Bank and Financial Institutions Act, 1993 with regard to exercise of powers by liquidator over the property of the company which are under the custody of the company Court under Section 456.
It is submitted on behalf of the Allahabad Bank, that the Companies Act, 1956 has not been mentioned in Sub-section (2) of Section 34 and thus the Act of 1993 shall have overriding effect over the provisions of the Companies Act, 1956. This submission has been accepted in Allahabad Bank v. Canara Bank, only to the extent that for the purposes of adjudication and recovery by the Tribunal. In such cases, the provisions of the Companies Act, 1956 shall be applicable only to the extent of Sections 529, 529A and 530. The Act of 1993 is a Special Act as against the Companies Act, 1956, only so far as the adjudication and execution of such decree is concerned. It does not over ride the provisions of the Companies Act, 1956 for all other purposes. The claims of Allahabad Bank and State Bank of India have not been adjudicated so far, and thus the sale of assets to be made by the official liquidator under Section 457(1)(c), shall not in any manner be inconsistent with or effect the right of adjudication of the claims of the Banks. In case the assets are sold, the Bank shall have right over the monies realized in accordance with the provisions of the Companies Act, 1956. The Banks, therefore, do no have a right at this stage to object to the sale of the assets of the company (in liquidation) and thus the application filed by Allahabad Bank, (A-31) and the application of State Bank of India (A-44) have no force and are rejected.
39. The next question to be considered by this Court is the application of the State Bank to consider the offer of Grasim Industries Ltd. made to the State Government in pursuance of its invitation for offer without associating the official liquidator. The State Government was a promoter and hold entire share capital of the company. It has not been able to run the company for the reasons disclosed in detail in the affidavit of Sri K.L. Meena (A-13). The company (in liq.) had accumulated loss of Rs. 160.13 crores on 31-9-1997 which increased to 448.85 as on 31-3-1998. The efforts made by BIFR for revival of the company by preparation of a scheme to be formulated by the Operating Agency or through workmen could not materialize. An advertisement for change of management issued on 6/8-3-1996 also failed for want of firm commitment form the State Government. The State Government caused delay at every stage. The State Government did not even avail the last opportunity given by the Board on 26-9-1996 to submit their financial proposals to the Board by 7-11-1996 and after having explored all possibility of rehabilitation, the Board formed an opinion to wind up the company. During the pendency of the winding up proceedings the State Government raised objection to the application by the workmen to explore the possibilities of revival and rehabilitation. In the Counter Affidavit of Sri K.L. Meena, Special Secretary, Industrial Development Department, Government of U.P. filed in the year 1998, it was denied that there is any possibility of rehabilitation. The Government denied that there were any surplus assets free from encumbrances and specifically stated that the State Government is not in a position to further invest huge amount to make any scheme viable. Sri K.L. Meena, Special Secretary, Industrial Development Department, Government of U.P. categorically stated in para 76 of the affidavit filed in 1998 that the Slate Government had communicated to the Board about decision of not being in a position to invest huge amount of thousands crores of rupees, proposed by the Operating Agency and that the decision of the State Government has never been reversed.
40. The State Government was also aware that the company has been wound up and that all its assets are deemed to be in possession of the Court. All the departments of the State Government opposed the sale and for providing exemptions or creating any further liabilities. The opinion given by the legal department was also not in favour of sale of the assets, but to file an application under Section 466 of the Companies Act for rehabilitation. The proposal to the cabinet was based on a consideration that the official liquidator is unable to dissolve companies in liquidation for decades, and it takes more than twenty years to sell the assets of the company during which the workers suffered irreparable hardship. This consideration had no basis whatsoever. The State Government had no material to form such an opinion. The official liquidator attached to the Court has been selling the assets and dissolving the companies in accordance with the provisions of the Companies Act, 1956 and that average period in dissolving a company is not more than two to three years. In the circumstances the Court has every reason to believe that the entire foundation of an anxiety for sale of assets was misplaced and was not supported by any material collected and placed on record.
41. Under Section 457(1)(c) the Liquidator has powers, with the sanction of the Court, to sell the movable and immovable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels. The assets can be sold either as a whole or in parcels. The Court can also explore to sell the assets of the unit as going concern in the interest of the workmen and also to put the resources of the State to re-sale for its optimum utilization. The counsel for the State Government cited Allahabad Bank's case (supra) in support of submissions that an opportunity should be given for selling the unit as a going concern. In the said case the company was wound up on 14-6-1990 and that the order had become final. The company was non-functional for long and that the special leave petition filed by workers union was also dismissed on 5-12-1997. The Supreme Court in order to give a last try to the found hopes expressed on behalf of the erstwhile workers, gave one more chance within a strict frame of time limit, subject to certain conditions. The official liquidator was directed to proceed with the sale of the assets of the company, firstly by selling plant, machinery and other movables, and thereafter other assets in such a manner to fetch the maximum price, keeping in view the interest of all the creditors.
42. Sri R.P. Goel, Advocate General, pressed the application filed by the State of U.P. for considering the sale of the assets to Grasim Industries Ltd. It is submitted by him that the State Government keeping the interest of workmen and optimum utilization of its natural wealth, initiated the process of sale of assets as going concern by privatization, after obtaining approval from the cabinet, and advertisements were issued in the daily newspaper, a result of which only one valid proposal was received from Grasim Industries Ltd. It was considered by High Powered Committee. Part 1 of the bid of Rs. 195 crores covers the secured creditors and workmen, Rs. 11 crores was offered as Part II of the bid, and upon negotiation has also agreed to pay Rs. 35 crores towards VRS of the employees of the company (in liq.). The Advocate General agrees that the exercise should have been made by the official liquidator, who has been appointed as the liquidator of the company, after seeking approval from the High Court, but the State Government in right earnest, in public interest made advertisement and have received an offer which complies with the requirements of the Committee for sale, with intentions to avoid further delay for sale of the assets of the company (in liq.).
43. I have already disposed of the objections of Allahabad Bank, State Bank of India to the application of the State Government in the preceding part of this order. Two more objections have been received first by Bharatpur Nutritional Products Limited (formerly known as Dalmia Industries Ltd.) vide application No. 79609 of 2001. It is submitted in February, 1991, on account of recurring loss suffered by company (in liq.), the State Government took a decision to privatize the corporation, and accordingly a memorandum of understanding was incorporated into between Government of U.P. and Dalmia Industries Ltd. on 14-2-1991 under which the Dalmia Industries Ltd. and its nominated company were to purchase 51 per cent shares of the company (in liq.) and take over the management of the corporation with all its assets and liabilities, on as is where is basis. In pursuance to the said arrangement a meeting of the Board of Director of the company (in liq.) was held on 7-3-1991 in which it was resolved to transfer only 49 per cent shares against the agreed transfer of 51 per cent. Accordingly 49 per cent share was transferred to Dalmia Industries and is nominated company and same were duly registered and recorded in the register of members. Against the agreed deal between the Government of U.P. and the Dalmia Industries Ltd. U.P., State Cement Corporation (Acquisition of shares) Ordinance, 1991 was promulgated taking over the share transferred or agreed to be transferred to Dalmia Industries Ltd. and its nominated company. Subsequently a reference was made under Section 15(1) of the Sick Industries Company (Special Provisions) Act, 1985 and the company (in liquidation) was declared sick on 7-10-1992. The floor price set by the Government for sale in the tender notice dated 20-2-2001 was for Rs. 195 crores. The applicant company or the buyers did not submit offers as the tender notice was bad and illegal. The official liquidator is the only person who has right and power to liquidate under the aegis of the Court. The tender notice was published without involving the official liquidator and taking prior permission of the court. It has further been stated that the offer of Grasim Industries Ltd. with number of exemptions, concessions and right offs is being accepted by the State Government causing stupendous losses to the State exchequer and that the process employed by the Government to sell the assets of the company (in liq.) is vitiated by arbitrariness, unfairness, illegality and wednesbury, unreasonableness. The floor price was to be used only for setting dues of the workmen and creditors, whereas the monetary value of the proposed sale by the Government for assets as well as concessions shows complete lack of commercial viability. According to the objector, the installed capacity of cement plants is Rs. 2.57 million tones, and that the cost of setting up new plant of the said installed capacity, is around Rs. 1300 crores, i.e., at the rate of Rs. Five thousand per metric tone, what is needed in the present old plant is only some repairs and modernization costing rupees two hundred crores. On making deductions on account of such repairs and modernization of the worth of the present plant is about Rs. 11000 crores. The entire share capital of the company (in Liq.) is about 70 crores. Apart from the plants, lime stone lease at Ninga and Kajrahat having over 100 millions tones limestone deposits adjacent to the factory site. The apart, all he properties of the corporation have also been included in the offer. The actual worth of the plants can also be gauged from the fact that (1) company (in Liq.) has larges installed capacity (2) strategic advantages of corporation included proximity to limestone deposits at Kajrahat, Ghurma, Rohtas and that markets lie on the forwarded direction via Chunar (3) mining lease have limestone deposits of over 100 million tones. (4) The units are located in the region which is a major market is eastern U.P. and Bihar, for cement and there is no other major cement plant in the region. (5) The units at Dalla and Chunar are well linked by roads and railways. The nearest airport is at Varanasi. Varanasi is 40 Kms. from Chunar and 120 Kms from Dalla accessed by a well maintained Varanasi Shakti Nagar Highway. The nearest major railway station is at Chopan about 8 Kms. from Dalla and is linked by Nilanchal Express with New Delhi and by Triveni Express with Lucknow and (6) in addition to Kajrahat, for which the lease rights are proposed to be transferred, the area has additional 225 million tones of limestone reserves in Rohtas limestone mines.
44. According to objector the reliefs and concessions granted in the offer which were not available earlier concerning past liabilities of the plants have a considerable impact almost to the tune of Rs. 800 crores on the state Exchequer which include electricity dues of about 110.70 crores, Trade Tax dues of Rs. 76.10 crores, Royalty dues on limestone of Rs. 20.10 crores. Government loans of Rs. 165.80 crores. Loans from financial institutions/banks along with interest of Rs. 289.62 crores, working capital loans Rs. 4.65 crores. Salaries and wages of the workers Rs. 106.64 crores and that is the official liquidator was required to liquidate the assets they would have costed the purchaser more than 1000 crores. In the present offer the State is hardly getting anything. According to objector the cost of bid concessions will put a burden of about Rs. 900 crores on the State Exchequer and this has been quantified by following trade tax exemption for 10 years (Rs. 70 crores per year) worked out on the basis of tax at the rate of Rs. 300 per ton and Waiver of royalty dues for 10 years and other benefits like renewing the limestone lease and electricity duty exemptions on captive power generation. It is submitted that an advertisement should have been published in India and abroad for inviting objections, after consulting and involvement of the official liquidator attached to this Court.
45. The applicant-objector has brought about the objections which are relevant for consideration, but have not shown or indicated their interest in purchasing the assets. The reasons given by them that the sale was not made by the official liquidator after seeking approval from the High Court cannot be said to be sufficient reason for not making an offer.
46. The workmen appearing through Sri Saumitra Singh have filed application to the effect that the offer of Grasim Industries Ltd. be considered favourably to avoid any delay in the matter of sale of the assets. The application filed on behalf of the CITU and 15 others supported by affidavit of Harendra Kumar Pandey have brought on record the number of unions, number of workers/employees per unit the period for which they have not been paid, wages structure, pay in the revised pay-scale, actual number of workmen from the date till which they employed with the corporation and the loan agreement with IDBI and State Bank of India. There are about 37 workers unions in the corporation. Out of these unions sixteen were petitioners in writ petition No. 15134 of 1998. There were about 5143 employees on roll in the company (in liq.) till 13-7-1998, and details giving number of employees grade-wise and designation-wise has been annexed to the supplementary affidavit. Apart from the aforesaid there are about 350 employees who have not been paid their retirement benefits after their retirement prior to 13-7-1998. The total number of employees to whom the dues are payable are approximately 5500. It has been submitted that majority of the employees have been paid their salary upto 12-7-1998. The retirement and statutory benefits to some of the existing and retired employees, retired prior to 12-7-1998 have not been paid. Certain employees have been paid their salary after 12-7-1998 on account of Court Orders. The Managing Director has been paid his salary upto 8-12-1997. Majority of the employees of the inter College at Churk and Dalla are being paid their salary by the State Government, Banks. Under a Scheme known as Gujarat Module, for VRS the employees are getting 45 days wages of each year on completed service of balance period (in terms of months) whichever is lower. A copy of VRS scheme as introduced in UPSMDC has been enclosed to the supplementary affidavit.
47. The counsel for the workers submitted that assets may be considered for sale as a going concern for the benefit of employment of the workmen, and that any decision in this regard must be taken as expeditiously as possible.
48. After winding a company under Companies Act, either as creditors winding up petition under Section 443 of the Companies Act or in pursuance of the opinion received from the Board for Industrial and Finance reconstruction under Section 20(1) of Sick Industries (Special Provisions) Act, 1985, which also includes just and equitable cause, the official liquidator may be appointed as liquidator of the company under Section 449 of the Companies Act and after having received possession of the assets and statement of affairs, he is required to sell the movable and immovable property and actionable scheme of property to be auctioned.
He holds property in trust for the creditors, workmen and shareholders to realize debts of the company institution or defend the suit prosecution or other legal proceedings or to carry on business of the companies far as may necessary for the initiation of winding up of the company. He has been given all power under Section 457(2) given in the name of and on behalf of the company and has powered under Section 453 to exercise all his power on the subject to the control of the Court. Once the Court has accepted the opinion of the BIFR that the company is insolvent and is unable to make its net worth positive while meeting all liabilities it is in the interest of all the creditors, workman and shareholders that the assets of the company be sold as early as possible. It is also in public interest to sell the assets so as to save the increasing financial burden on the nonproductive assets and further to save and utilize the natural resources. In the present case the company has been wound up and the order of the winding up of the company has been wound up and the order of the winding up of the company has been upheld upto the Supreme Court. The State Government and all concerned have admitted that there is no possibility of its commercial revival, without reliefs and concessions by the State Government. The BIFR made all attempts to persuade the State to revive but the State Government was not ready to accept any further liability.
49. Rules 172 to 274 of the Companies (Court) Rules, 1959, made by Supreme Court of India, in constitution with High Courts, under Section 643(1) and (2) of Companies Act, 1956 provide for sale by official liquidator in exercise of his power under Section 457(1)(c) of the Act. Rule 272 and Rule 273 is quoted as below :
"272. Sale to be subject to sanction and to confirmation by Court.--Unless the Court otherwise orders, no property belonging to company which is being wound-up by the Court shall be sold by the Official Liquidator without the previous sanction of the Court, and every sale shall be subject to confirmation by the Court."
"273. Procedure at Sale.--Every sale shall be held by the Official Liquidator, or, if the Judge shall so direct, by an agent or an auctioneer approved by the Court, and subject to such terms and conditions, if any as may be approved by the Court. All sales shall be made by public auction or by inviting sealed tenders or in such manners as the Court may direct."
50. The Court is considering the application of the State Government for sale to Grasim Industries Ltd. and is unable to accept the request for the following reasons:
(1) The State Government was advised by all its department that it is not feasible to bear any financial burden by selling the unit as on going concern by privatization after offering any relief and concession. Clause-4 of the note put up to the cabinet, which was approved by the cabinet, in terms, recommended to offer the unit for sale as a going concern by privatization, after removing the official liquidator. The cabinet approved the recommendation in terms of said clause. The acceptance of this proposal could only result into an application under Section 466 of the Companies Act for standing of winding up. There was no other way to offer the unit for sale by removing the official liquidator. However the acceptance of this proposal was not implemented in its term. The State Government acting contrary to the acceptance of the proposal of the cabinet advertised the unit for sale by inviting offers without approaching the Court for staying the proceeding for winding up and to remove the official liquidator. In invited offers accepted the tender and thereafter made a request to the Court to consider the offer by way of assisting the Court in finding out a purchaser for sale of unit. The Court further finds that the aforesaid cabinet decision was arrived on considerations, which cannot be fully justified. These can be summarized as below:
(a) It was based on a consideration that the Official Liquidator will take more than twenty years to sell the assets. This advice was not based on any material or collection of data, and, in fact, the Official Liquidator U.P. has a record of selling assets of the Company (in liq.) at a much faster schedule of time.
(b) All the department of State Government, namely, Finance Trade Tax, U.P. Power Corporation etc. advised the state Government not to sell the properties as going concern by offering any reliefs and concessions.
(c) It was objected to by the Trade Tax Department and Finance Department that conference of the Chief Ministers had agreed not to offer any tax concession to any entrepreneurs being causing financial burden and in case of any breach, the Central Government may stop giving financial aid to the State Government.
(d) The Law Department clearly advised that such an action can only be taken under Section 466 of the Companies Act by applying for say of winding up by adopting process of rehabilitation, and not through sale of assets as going concern.
(2) The first part of the bid of Rs. 195 Crores was based on the consideration namely that is workman's dues have been finalized up to date of winding up order and that the financial institutions and the Bank have entered into one time settlement by accepting only the principal amount towards their outstanding dues. The Court finds that workers dues were not calculated and that the official liquidator has reported that these figures are still being processed. The Allahabad Bank has been seriously objected a sale of the assets of the company (in liq.) and is pressing a suit of recovery of Rs. 87,15,71,259.32 crores the State Bank of India has also filed a suit for recovery of Rs. 62,68,50,394.53 crores. These suits are pending before the Debt Recovery Tribunal at Allahabad.
51. The projection made by the State Government for the payment of principle amount financial institutions by one time settlement to be only Rs. 60 crores was based only upon a letter written to IDBI, the leading financial institution, under consortium agreement, to consider one time settlement. Inspite of the offer in the joint meeting of the creditors, no consensus was arrived between them to accept one time settlement. Statements were given by the counsel for the Allahabad Bank and State Bank of India repeatedly that the State Government has not even approached them for one time settlement. After some persuasion, the State Bank of India filed an application on 22-11-2001 signed by their counsel without any affidavit stating that the Bank will not oppose for sale provided the amount of Rs. 206 crores offered by the Grasim Industries Ltd. is distributed in a manner that Rs. 135 crores be given to the workmen's dues and Rs. 58.88 crores as one time settlement with financial institution and banks in which the share of State Bank of India is Rs. 7.52 crores and that the surplus of 12.12 crores will go to State Bank of India and Allahabad Bank in the ratio of Rs. 7.13 crores and Rs. 4.99 crores respectively and thus demanded a sum of Rs. 14.65 crores towards the liquidation of the dues lying in the account of the company (in liq.). It imposed further condition to the effect that in case the sale proceeds of the assets exceeds Rs. 206 crores the said excess sale proceeds shall be paid to the State Bank of India over and above the aforesaid amount towards the liquidation of its dues as secured creditors and that sale must take place within six months and that the proceedings before the Debt Recovery Tribunal shall not be affected until the receipt of the sale proceed as above and the guarantees of the State of Uttar Pradesh shall also not stand discharged till the liquidation of bank dues to the extent of Rs. 14.65 crores, or such higher amount as mentioned above, is fully paid. The Bank further reserved its right to recover its dues before the Debt Recovery Tribunal and keeping all its securities fully effective. The last condition, i.e., condition No. 8 is most important in which the State Bank of India stated as follows :
"8. That the above conditions are subject to the final approval of the Board of the applicant Bank, i.e., State Bank of India."
52. The Court required the application to be supported by affidavit of a responsible Officer of the Bank and granted time for approval of the aforesaid proposal by the Board of the Bank Sri Kush Saxena. Advocate, filed an affidavit of Harendra Bansal, Chief Manager of the State Bank of India, Ghosia Branch, Ghosia, District - Sant Ravi Das Nagar, dated 4-12-2001, reiterating the contents of the application mentioned as above. Till the last date i.e., 3-1-2002 when the orders were reserved, the State Bank of India was unable to bring on record approval of the Board of Directors. The Allahabad Bank was most reluctant to give any commitment and after repeated orders to make its stand clear, an application was filed by Allahabad Bank through its counsel Sri P.N. Tirpathi stating that the State Bank of U.P. is guarantor of the dues of Allahabad Bank and in case the amount realized from the sale proceeds of the assets of the corporation fall short the State Government is liable to make the payment. Paragraphs 4, 5, 6, 7, 8 and 9 of the application of Allahabad Bank are quoted as below:
"(4) The application of the State of U.P. is mala fide because they want to escape their liability by this subterfuge. State of UP First wanted to negotiate with IDBI alone, thereafter they made certain proposals with the State Bank of India alone. No definite proposals have come from the Government. The proposal is peculate. There is no definite terms to peruse us, though we are willing for one time settlement and are waiting for a specific and detailed compromise proposal disclosing the sharing pattern acceptable to all the Financial Institution and Banks, which may be placed before their competent authorities for consideration.
(5) The State of U.P. should also indicate in the compromise proposal its responsibility in case the amount fall short of the amount for One Time Settlement.
(6) So far the amount indicated by the S.B.I., which will be approximate Rs. 12.10 crores for Allahabad Bank, we are willing to accept in principle towards out share out of Rs. 71.00 crores as calculated by the S.B.I. But in case there is any surplus sale proceeds the same should be made available to out bank proportionately and not as claimed by the S.B.I. exclusively.
(7) The aforesaid compromise will not affect the legal right of the Allahabad Bank in the proceedings pending before the D.R.T. Allahabad against the respondents.
(8) Notwithstanding hereinbefore the Bank reserves its right to recover its dues as claimed in the application before the D.R.T. Allahabad and also all its rights vis-a-vis to the securities shall remain fully effective and the charge of the bank over such securities shall continue in favour of the Bank.
(9) Under the circumstances we are unable to make any further comment except to say that the State Government should make a specific compromise proposals with definite terms that can be put before the Board of the Allahabad the competent authority for consideration and approval."
53. Sri Vikram Nath, Advocate appearing for IDBI filed a copy of the letter dated 28-11-2001 sent by Deputy General Manager (Legal) IDBI, in response to the order of the Court seeking comments from other bank and financial institutions to the application of the State Government in which it was stated that in joint meeting held on 2-8-2001, the Financial Institutions have agreed to accept Rs. 241 crores offered by Grasim Industries Ltd. To be distributed as follows :
(i) VRS of the workmen Rs. 35 crores
(ii) Workers dues Rs. 135 crores
(iii) Financial Institutions/Bank (principal amount) Rs. 60 crores (iv) Towards the dues of the Financial Institutions/ Banks proportionate basis) Rs. 11 crores
Further it is stated in this letter that the working capital limit sanctioned by the S.B.I. are secured by first charge on the assets of the company and it is not secured by first charge and mortgage on all movable and immovable properties of the company, and as such they cannot have claim on the balance claim sale proceeds. The term loan of Rs. 5 crores by SBI is secured by first charge and mortgage on the immovable properties of the company. In view of the above, the claim of the S.B.I. and Allahabad Bank on the balance sale proceeds as well as excess sale proceeds is illogical and untenable. It is stated in the letter that the State Bank of India is misleading the Court and is trying to gain out of same. In view of the above it is observed in the letter that financial institutions shall not agree with the proportion of sharing suggested by SBI and sought adjournment for taking up the matter with senior executives of SBI. The aforesaid application and affidavit and correspondence shows that the Banks and financial institutions have not agreed to the terms put by the State Government and that the Allahabad Bank is still objecting towards the acceptance of the amount towards one time settlement, The matter has not been considered by the Board of State Bank of India and that IDBI is not in favour of the acceptance of the amount set apart for Financial Institutions and Banks in the first part of the bid i.e., Rs. 60 crores and other amount over and above the bid of Part 1, and thus the entire basis of invitation of offer with regard to the settlement of dues with the Financial Institutions and Banks in the first part of the bid i.e., Rs. 60 crores and other amount over and above the bid of Part 1, and thus the entire basis of invitation of offer with regard to the settlement of dues with the Financial Institutions and Banks was unfounded.
(3) The State Government was well aware of the legal position that as a promoter which failed to run the unit, and had also decided and failed to privatize it in the year 1991, it was no loner open to it to offer the assets of the company (in liq.) for sale by way of privatization as going concern, without seeking prior approval of the Court and that the sale could only be made through official liquidator.
(4) The State Government did not advertise for sale by giving it wider publicity in publication in all leading newspapers as well as inviting offer for sale by global tenders. After liberalization of economy and freedom of trade in investment the assets and the natural wealth is likely to attract foreign participation in sale.
(5) The concession granted by the State Government for exemption from Trade Tax for ten years, waiver of royalties for ten years sanction of power load and electricity duty exemptions for exceeded the offer of Rs. 241 crores made by Grasim Industries Ltd.
(6) The anxiety of the State Government who did not make any response to give financial assistance before BIFR and AAIFR and was more than eager of winding up the company, casts a shadow of doubt on its intention, for accepting its single offer without exploring any possibility of higher offer. It is the duty of the Court which is trustee of the property to look for the highest amount to be received out of the sale of the assets, both in public interest as well as in the interest of the creditors, workmen and the shareholders. The Court is thus not satisfied by the process adopted for the sale of the assets by the State Government.
(7) Inspite of repeated queries, the State Government was not able to explain as to why Grasim Industries Ltd. has not made offer directly to the official liquidator and was trying to remain in the shadow of the State Government in making the offer.
(8) The State Government was not willing to offer the reliefs and concessions to any other party. Initially when the Court directed the official liquidator to seek response of the State Government in offering the same concession to any higher offered, the reply given by Sri Pradeep Shukla, Secretary State Government to the Official Liquidator dated 30-10-2001 amounted to refusal. Para 2 of the reply is quoted as below :
"2. The Government of U.P. does not support the move for retendering through the Official Liquidator due to the following reasons :
(1) It will only unnecessarily delay the revival of the unit through privatization.
(2) The ideas to transfer the unit as an ongoing concern and not merely disposal of assets,
(3) There is no guarantee that re-tendering through the Official Liquidator will get a higher bid.
(4) The other institutions have also to agree to this move.
3. The reliefs and concessions offered by the Government of U.P. can remain valid for the move only if the point mentioned above is taken care of."
54. Sri Ashok Mehta, the learned Chief Standing Counsel tried to interpret the aforesaid letter of the State Government dated 30-10-2001 to the official liquidator in a different manner. He submitted that the State Government cannot refuse to offer the same reliefs and concessions to any higher offerer. The Court required him to put it in the form of an affidavit of Principal Secretary Industries. After two adjournments an affidavit was filed by Sri S.N. Shukla, Industries Development Commissioner, U.P. dated 1-1-2002. The contents of this affidavit are very important for arrival at any positive conclusion in this matter, and thus I am quoting at the paragraphs of this affidavit are quoted as below :
"(1) That the deponent is presently posted as Industrial Development Commissioner and Principal Secretary, Government of U.P. Lucknow and as such he is fully acquainted with the facts deposed to below.
(2) That the present affidavit is being filed in compliance with the order dated 20-12-2001 passed in the aforesaid matter, by the Hon'ble Court.
(3) That the State Government's primary concern has been revival of unit at the earliest though privatization in the interest of the workers. The idea is not merely disposal of assets buy their transfer to a purchaser who has the necessary resources, competence and experience to run the unit.
(4) That the offer of M/s. Grasim Industries has been received after open public tender and they are one of the largest cement producers in the country.
(5) That the request made by the State Government to the Hon'blc Court was by way of helping and assisting the Liquidator in the disposal of the Company's property under Section 457(1)(c) to save time instead of initiating the process afresh at his level.
(6) That the State Government has no objection to this Hon'ble Court exploring the possibility of a higher bid and the State Government would in that even extended the same reliefs and concessions as those offered to M/s. Grasim Industries. However, it is submitted that the following concerns of the State Government may kindly be also kept in view while taking a decision in this regard:--
(i) The process of restarting the Unit may not get unduly delayed.
(ii) There is no guarantee for a higher bid and meanwhile we may loose the offer already received.
(iii) Besides, the bid amount, the resources competence, experience and the commitment of the bidder to run the unit also has to be kept in view.
(7) That, however, in case it is decided to retender then the present offer of M/s. Grasim Industries should remain valid and the amount offered by them should be kept as the minimum reserved price. Moreover in case any higher bid is received in all fairness. Grasim Industries may be given the first option to purchase the property at that price.
(8) That beside the State Government the consent of the Financial Institutions and Banks to extend similar accommodation the newpurchaser is also necessary."
55. For the aforesaid reasons the application of the State Government for considering sale to Grasim Industries Ltd. as only offerer, in pursuance of invitation for sale does not find favour of the Court and is accordingly rejected. The Official Liquidator is directed as follows :
1. He shall take steps to sell the assets and for this purpose a committee for sale of the assets of the company (in liq.) is constituted consisting of following members :
(1) Official Liquidator, U.P., Allahabad, a Chairman of the Committee.
(2) A nominee of the IDBI not below the rank of Dy. General Manager.
(3) A nominee of the State Bank of India not below rank of Chief Manager.
(4) Industrial Development Commissioner and Principal Secretary, Government U.P. or his nominee not below the rank of Secretary in the Government of U.P.
2. The sale of assets shall be effected by public offer of sale through sealed tender after advertisement to be carried out in 'Times of India', 'Statesmen1, Asian Age', Economic Times', 'Financial Express' and 'India Today' and such other newspapers or journals as the Committee recommends. The tender shall also be published to reach the global markets for which the committee shall decide the mode of publication. For the purpose of advertisement the Committee shall finalize the draft of advertisement after seeking approval from the Court. The tender document prepared by the State Government shall be considered as a basic document for this purpose, with modification and changes to be considered and proposed by the Committee with approval of the Court.
3. The Committee shall apart from advertising the assets in the aforesaid newspapers, send invitation of offers to all the leading Cement manufacturers in the country. All prospective bidders shall be allowed to inspect on the stipulated date or dates in the presence of the committee or their representative. The bids shall be made in sealed envelop to be received in the office of the official liquidator, to be opened by the committee on the previously specified and notified dates and time in the presence of the bidders or their representative, and shall be open for negotiation between the valid highest offerers for considering their offers subject to their resources, competence, experience, commitment and financial capacity.
4. The reserve price of the entire assets shall be Rs. 271 crores, worked out on the basis of the price offered by Grasim Industries Ltd. of Rs. 241 crores and the price of assets at Churk which were not included in the offer invited by State Government and valued by State Government in its proposals to cabinet at Rs. 30 crores. The offerer shall be required to deposit earnest money of Rs. 10 crores by Bank Drafts in favour of official liquidator, U.P. at Allahabad. This amount shall be forfeited if the party whose offer/bid is finally accepted, makes default in payment on the terms and conditions of sale, or such negotiated conditions of sale or completing the offered formalities within the due date. If, however, the sale is completed and the conditions are complied with within specified time the earnest money shall be adjusted towards the final sale price without carrying any interest. It will be open to Grasim Industries Ltd. to make an offer to the official liquidator U.P. at Allahabad by depositing the earnest money as above.
5. If the bid is finally accepted by the Court, twenty-five percent of the sale consideration excluding the earnest money shall be paid within a period of 30 days, from the date of intimation regarding the final acceptance of the bid on the notified address of the bidder by registered post (AD) and balance in instalments to be negotiated with the Committee and accepted by Court, which shall not exceed beyond one year, or the total payment. The successive bidder shall, within 30 days of the receipt of the intimation regarding acceptance of his bid, shall furnish the Bank Guarantees for the purpose of payment of balance amount, to the extent of entire balance amount as may be considered satisfactory by the Court, to secure timely payment of consideration for the assets purchased.
6. The earnest money received from the unsuccessful bidders shall be returned to them. The possession of the assets purchased and title thereof shall be transferred to purchaser only on receipt of full payment of the purchase consideration, along with interest @ 18 per cent p.a., for delayed payment, if any, to be accepted with prior approval of the Court.
7. The sale of the mining and tenancy right shall be subject to laws applicable to the State Government of U.P. The reliefs and concessions shall be the same as guaranteed by the State Government in the affidavit of Sri S.N. Shukla, Industrial Development Commissioner and Principal Secretary, Government of U.P. quoted as above.
8. The Court reserves all rights of change or modification in the procedure of sale and accepting or rejecting the sale in its absolute discretion. The entire sale proceeds after deducting expenses incurred by the official liquidator, so far and expenditure made during the sale, shall be deposited with the official liquidator as per provision of the Companies Act 1956. Scales of fees and expenditure shall be allocated in accordance with the relevant provisions of the Companies (Court) Rules, 1959 and the orders to be passed by the Court relating to the liquidation of the company under the Companies Act.
56. The official liquidator is directed to take steps for sale of the assets of the company expeditiously keeping in view the facts and circumstances of the case and observations made in this order and the reliefs and concessions offered by the State Government to any intending higher offerer. The official liquidator will firstly explore the possibility of sale of the assets 'as a whole' as going concern, and in the alternative by sale of assets in such parcels as may be convenient and expedient with the approval of the Court



HIGH COURT OF JUDICATURE OF ALLAHABAD
CJ's Court
Company Appeal No.1239 of 2006
RPJ Minerals Private Limited and another
Vs.
Shri S.K. Saxena, Official Liquidator, U.P. State Cements Corporation Ltd. & Others
Counsel for the appellants: 1. Mr. Viplav Sharma, Adv.
2. Mr. Sushil Kumar Singh, Adv.
Counsel for the respondents: 1. Mr. Naveen Sinha, Sr. Adv.
2. Mr. Yashwant Verma, Adv.
3. Mr. Anil Mehrotra, Adv.
4. Mr. Ashok Mehta, Adv.
~~~~~~
Hon'ble Ajoy Nath Ray, CJ.
Hon'ble Ashok Bhushan, J.
This appeal is disposed of summarily and the only doubt that we feel in passing our judgment is as to whether we were justified in spending as much time as we have, about four days, in hearing the appellants' case or giving any importance to the points raised on behalf of the appellants. Our remark is not to be taken as casting any sort of aspersion on the counsel appearing for the appellants, who did a valiant job, but our remark is directed only against the thoroughly unsubstantial nature to the appellant's case and the wholly untenable position of the appellant in regard to its locus standi.
Excepting for a small clarification with regard to paragraph 58, which is the last paragraph of the judgment and order passed by Hon'ble Mr. Justice Sunil Ambwani on the 20th of September, 2006, which is impugned before us, we are in respectful, full and complete agreement with the reasoning given and the order passed by the Hon'ble Single Judge. The second minor reservation we have is with regard to a wrong submission made by the State Government with regard to the State Cabinet decision taken in the year 2001, the exact import of which was not made clear to the Hon'ble Judge, but subsequently was made clear to us. This is noted by his Lordship in the last page but one of the judgment, in the latter portion of paragraph 56. In our opinion, this incorrectness of fact, which was the result of the State's submission and pleadings, is not the matter of any material importance.
The appeal arises basically in respect of a sale of Company assets and other assets approved and confirmed by the Company Court in respect of the Company in liquidation, i.e., U.P. State Cements Corporation Limited. The order of winding up was passed in the year 1999; the sale of the said assets was approved on the 30th of January, 2006 and the order of confirmation was passed on the 11th of October, 2006. The State Cabinet incidentally decided to abide by the decision given by the Company Court on the day before, i.e., on the 10th of October, 2006 and as such, the State Government has wholly supported purchasers, i.e., Jai Prakash Associates Ltd., namely, JAL.
The purchase was made for a total sum of Rs.459 crore; the entire money has been paid to the official liquidator, who is holding the sum, apparently watching the result of the appeal since disbursements are urgently to be made; these disbursements include, as we understand, payments of about Rs.1.00 crore to the erstwhile workers. A further sum upwards of Rs.250 crore is to be paid to financial institutions, although there is some dispute in this regard.
The sale comprised of the Company assets in the Dalla region including mining leases for blocks 1, 2, 3 and 4 of the Kajrahat Limestone Mines. The dispute and the only dispute in this appeal is with regard to blocks 5, 6 and 7 of the said Kajrahat Limestone Mines, which are adjacent to the factory premises.
It is on record that right from the beginning with the advertisement being issued on the 10th of February, 2001 in the Economic Times and the Business Standard, the State Government wanted to join the Company sales to make the offer more attractive and thus, they brought along for sale along with Company assets, the mining leases for these additional blocks 5,6 and 7 in Kajrahat.
The Memorandum of Information, which could be bought by intending purchasers for Rs.5,000/- clearly mentioned all the seven mines. The State Government and the official liquidator have both categorically and unequivocally supported the stand that from the date of the making of the Memorandum of Information available to the public, the sale included blocks 5,6 and 7 and offers were invited on that basis. The money has been paid by  JAL on this basis as an essential part of the Company Court sale.
It is submitted on behalf of the appellants-R.P.J. that their promoters Balaji Earthmovers, a partnership firm, entered into an agreement with U.P. State Mineral Development Corporation (UPSMDC) for a joint venture including operation of mining leases. The blocks 5, 6 and 7 were originally given under a 20 years lease by the State Government to the U.P. State Industrial Development Corporation (UPSIDC). In 1993 the lease, which had run out on or about 8.11.1982 was renewed for twenty years in favour of the UPSMDC. The UPSMDC went into doldrums about the time 2001and 2002 when the joint venture between Balaji and the appellant took place; the UPSIDC Minerals Division officiated for UPSMDC at this time; later on UPSMDC was sought to be revived by the State Government in or about the year 2003.
There is an agreement, to which the State Government is also a party by way of which the four months of the unexpired term of the renewed portion of the lease from 1982 to 8.11.2002 was transferred to the appellant on the 31st of July 2002. The agreement makes it clear that RPJ will stand in the shoes of the lease for the purpose of liabilities, but this is significantly absent from the agreement, that it will stand in the shoes of the UPSMDC                          in regard to the rights also. They thus went into shoes of the lessee only so far as the left shoes, so to speak, was concerned.
If the rights of Balaji came to an end with the expiry of the 8th of November 2002 alongwith the rights of RPJ, then and in that event, the appellant has no locus standi whatsoever.
The sole and single basis on which the appellant seeks to support its case is to be found at page 218 of the paper book before us, which is a letter by a Secretary dated 25.2.2004, which is said to be a recording of the  decision to renew the lease in respect of the said blocks 5, 6 and 7 (alongwith other mines with which we are not concerned) for another 20 years from the year 2002.
It is a matter of the utmost surprise to us that on a single document of this nature an appeal was sought to be maintained seeking to stall the utilization of Rs.459 crore, and the mining operations with which the fate of the inhabitants of that part of the Eastern region of U.P. is intimately concerned; it is a part of the lease agreement that the Kajrahat Limestone that would be quarried would be utilized for cement production in that very area.
Our surprise is magnified because previously an offer of Rs.241 crore made on behalf of one Grasim Industries in this very regard was turned down by the same Hon'ble Company Judge, and his Lordship directed the sale to go ahead, giving detailed directions in this regard. A Sale Committee was formed to assist of the official liquidator. The basic document was declared to be the Memorandum of Information, which saw the first light of the day in the year 2001; the judgment in this regard passed by Hon'ble Sunil Ambwani, J., is reported in Volume 112 Company cases page 562, and the judgment was delivered on the 14th of February 2002.
After various proceedings, the sale was ultimately confirmed four years later.
During the year 2002, when the lease in favour of UPSMDC expired, and the year 2006 no Court proceedings were taken by the appellant, no lease was executed in favour of the UPSMDC or the appellant of blocks 5, 6 and 7 by the State. The entire business community knew, and must be taken to have known by all reasonable standards of the commercial courts that blocks 5, 6 and 7 were up for sale; but the appellant alleges entire ignorance on its part. We can only make this remark that if it was ignorant, it should not have been so, in regard to important events, which were happening in regard to the very neighbourhood in question, where the appellant claims to have been present all along.
The recording of the decision of renewal in the "all important" letter of 25.2.2004 is riddled with doubts and disputes; it mentions Bhalwa Mines and it is said by the appellant that Kajrahat Mines are included in Bhalwa Mines although the villages of Billi, Kajrahat and Bhalwa are mentioned separately at the heading of the letter. The letter mentions a renewal of 20 years from a date 2.1.2002, which is a date without meaning. The letter further states that the decision to renew is conditional upon RPJ performing all its joint venture agreement obligations as contained in the written agreement dated 5.6.2002.
Above all, and this is of the utmost importance, the letter is not written to or given in favour of RPJ, but given in favour of UPSMDC.
UPSMDC and UPSIDC, Minerals Division and all, are instrumentalities of the State of U.P. The State of U.P. has categorically decided not to undo the big sale, which has produced Rs.459 crore for being absorbed in the industry; there was no other higher offer coming. This sale is sought to be undone by cutting away a chunk, which was submitted to be the most important chunk of the Kajrahat Mining Limestone line of mines. On the basis of this sole and single document of 25.2.2006, if we were to permit the appellant to have any relief, we would in effect be ruling that the appellant has a right to have specific performance against the UPSMDC causing them to sue the State Government; the suit would be for the purpose of obtaining specific performance of the renewal; further that such suit is to be decreed even though the UPSMDC has shown absolutely no intention of either obtaining a renewal or going against the decision of the State Cabinet, which it cannot.
The State Cabinet did not decide specifically to include blocks 5, 6 and 7 in the properties to be put for sale in 2001 which was wrongly submitted before the Hon'ble Single Judge but the Cabinet had never gone against the publication of the Memorandum of Information in 2001 which included the said three blocks; it has also categorically affirmed all the proceedings on the 10th  of October 2006. In regard to the aforesaid paragraph 58, we merely want to state this that the two sentences written by his Lordship therein are to be read together and UPSMDC and RPJ Minerals shall not be allowed any mining activities in the areas mentioned only in so far as those are contained in the properties sold to JAL on the basis of the Company sale approved and confirmed as stated hereinbefore.    
Before we part with this case, we wish to make it plain that this is not a writ matter. We are concerned with basically private litigation although the Mines and Minerals Regulations and Development Act, 1957 and the Mineral Concession Rules of 1960 are there in the background and any person having locus standi can raise points about that Act and those rules as and when such points practically arise, and not merely because some litigation is thought to be more beneficial to this business house or that business house.
In brief this was a private litigation between the two business groups RPJ and JAL; RPJ has a joint venture with UPSMDC, which is going on. There is nothing in their agreement (see page 196 paragraph 18 of the agreement dated 5.6.2002) more than this that UPSMDC is to bring to RPJ the mining leases, which it obtains on approval by the State; there is nothing in the agreement to indicate that UPSMDC (i.e.  the State) will do all it can to increase the basket for RPJ as much as it can, so that RPJ can increase its mining activities. In the face of this agreement and this clause which must be taken to be referred to in the said letter of 25.2.2004, we are really at a loss to understand how we could hear this appeal for so long and stall the disbursement of Rs.459 Crore and the starting of mining operations by the rightful party, which should be done as expeditiously as possible.
Apart from the said clarification with regard to paragraph 58, the appeal is dismissed.
Dt: 27.10.2006


HIGH COURT OF JUDICATURE OF ALLAHABAD
CJ's Court
Company Appeal No.1239 of 2006
RPJ Minerals Private Limited and another
Vs.
Shri S.K. Saxena, Official Liquidator, U.P. State Cements Corporation Ltd. & Others
Counsel for the appellants: 1. Mr. Viplav Sharma, Adv.
2. Mr. Sushil Kumar Singh, Adv.
Counsel for the respondents: 1. Mr. Naveen Sinha, Sr. Adv.
2. Mr. Yashwant Verma, Adv.
3. Mr. Anil Mehrotra, Adv.
4. Mr. Ashok Mehta, Adv.
~~~~~~
Hon'ble Ajoy Nath Ray, CJ.
Hon'ble Ashok Bhushan, J.
This appeal is disposed of summarily and the only doubt that we feel in passing our judgment is as to whether we were justified in spending as much time as we have, about four days, in hearing the appellants' case or giving any importance to the points raised on behalf of the appellants. Our remark is not to be taken as casting any sort of aspersion on the counsel appearing for the appellants, who did a valiant job, but our remark is directed only against the thoroughly unsubstantial nature to the appellant's case and the wholly untenable position of the appellant in regard to its locus standi.
Excepting for a small clarification with regard to paragraph 58, which is the last paragraph of the judgment and order passed by Hon'ble Mr. Justice Sunil Ambwani on the 20th of September, 2006, which is impugned before us, we are in respectful, full and complete agreement with the reasoning given and the order passed by the Hon'ble Single Judge. The second minor reservation we have is with regard to a wrong submission made by the State Government with regard to the State Cabinet decision taken in the year 2001, the exact import of which was not made clear to the Hon'ble Judge, but subsequently was made clear to us. This is noted by his Lordship in the last page but one of the judgment, in the latter portion of paragraph 56. In our opinion, this incorrectness of fact, which was the result of the State's submission and pleadings, is not the matter of any material importance.
The appeal arises basically in respect of a sale of Company assets and other assets approved and confirmed by the Company Court in respect of the Company in liquidation, i.e., U.P. State Cements Corporation Limited. The order of winding up was passed in the year 1999; the sale of the said assets was approved on the 30th of January, 2006 and the order of confirmation was passed on the 11th of October, 2006. The State Cabinet incidentally decided to abide by the decision given by the Company Court on the day before, i.e., on the 10th of October, 2006 and as such, the State Government has wholly supported purchasers, i.e., Jai Prakash Associates Ltd., namely, JAL.
The purchase was made for a total sum of Rs.459 crore; the entire money has been paid to the official liquidator, who is holding the sum, apparently watching the result of the appeal since disbursements are urgently to be made; these disbursements include, as we understand, payments of about Rs.1.00 crore to the erstwhile workers. A further sum upwards of Rs.250 crore is to be paid to financial institutions, although there is some dispute in this regard.
The sale comprised of the Company assets in the Dalla region including mining leases for blocks 1, 2, 3 and 4 of the Kajrahat Limestone Mines. The dispute and the only dispute in this appeal is with regard to blocks 5, 6 and 7 of the said Kajrahat Limestone Mines, which are adjacent to the factory premises.
It is on record that right from the beginning with the advertisement being issued on the 10th of February, 2001 in the Economic Times and the Business Standard, the State Government wanted to join the Company sales to make the offer more attractive and thus, they brought along for sale along with Company assets, the mining leases for these additional blocks 5,6 and 7 in Kajrahat.
The Memorandum of Information, which could be bought by intending purchasers for Rs.5,000/- clearly mentioned all the seven mines. The State Government and the official liquidator have both categorically and unequivocally supported the stand that from the date of the making of the Memorandum of Information available to the public, the sale included blocks 5,6 and 7 and offers were invited on that basis. The money has been paid by  JAL on this basis as an essential part of the Company Court sale.
It is submitted on behalf of the appellants-R.P.J. that their promoters Balaji Earthmovers, a partnership firm, entered into an agreement with U.P. State Mineral Development Corporation (UPSMDC) for a joint venture including operation of mining leases. The blocks 5, 6 and 7 were originally given under a 20 years lease by the State Government to the U.P. State Industrial Development Corporation (UPSIDC). In 1993 the lease, which had run out on or about 8.11.1982 was renewed for twenty years in favour of the UPSMDC. The UPSMDC went into doldrums about the time 2001and 2002 when the joint venture between Balaji and the appellant took place; the UPSIDC Minerals Division officiated for UPSMDC at this time; later on UPSMDC was sought to be revived by the State Government in or about the year 2003.
There is an agreement, to which the State Government is also a party by way of which the four months of the unexpired term of the renewed portion of the lease from 1982 to 8.11.2002 was transferred to the appellant on the 31st of July 2002. The agreement makes it clear that RPJ will stand in the shoes of the lease for the purpose of liabilities, but this is significantly absent from the agreement, that it will stand in the shoes of the UPSMDC                          in regard to the rights also. They thus went into shoes of the lessee only so far as the left shoes, so to speak, was concerned.
If the rights of Balaji came to an end with the expiry of the 8th of November 2002 alongwith the rights of RPJ, then and in that event, the appellant has no locus standi whatsoever.
The sole and single basis on which the appellant seeks to support its case is to be found at page 218 of the paper book before us, which is a letter by a Secretary dated 25.2.2004, which is said to be a recording of the  decision to renew the lease in respect of the said blocks 5, 6 and 7 (alongwith other mines with which we are not concerned) for another 20 years from the year 2002.
It is a matter of the utmost surprise to us that on a single document of this nature an appeal was sought to be maintained seeking to stall the utilization of Rs.459 crore, and the mining operations with which the fate of the inhabitants of that part of the Eastern region of U.P. is intimately concerned; it is a part of the lease agreement that the Kajrahat Limestone that would be quarried would be utilized for cement production in that very area.
Our surprise is magnified because previously an offer of Rs.241 crore made on behalf of one Grasim Industries in this very regard was turned down by the same Hon'ble Company Judge, and his Lordship directed the sale to go ahead, giving detailed directions in this regard. A Sale Committee was formed to assist of the official liquidator. The basic document was declared to be the Memorandum of Information, which saw the first light of the day in the year 2001; the judgment in this regard passed by Hon'ble Sunil Ambwani, J., is reported in Volume 112 Company cases page 562, and the judgment was delivered on the 14th of February 2002.
After various proceedings, the sale was ultimately confirmed four years later.
During the year 2002, when the lease in favour of UPSMDC expired, and the year 2006 no Court proceedings were taken by the appellant, no lease was executed in favour of the UPSMDC or the appellant of blocks 5, 6 and 7 by the State. The entire business community knew, and must be taken to have known by all reasonable standards of the commercial courts that blocks 5, 6 and 7 were up for sale; but the appellant alleges entire ignorance on its part. We can only make this remark that if it was ignorant, it should not have been so, in regard to important events, which were happening in regard to the very neighbourhood in question, where the appellant claims to have been present all along.
The recording of the decision of renewal in the "all important" letter of 25.2.2004 is riddled with doubts and disputes; it mentions Bhalwa Mines and it is said by the appellant that Kajrahat Mines are included in Bhalwa Mines although the villages of Billi, Kajrahat and Bhalwa are mentioned separately at the heading of the letter. The letter mentions a renewal of 20 years from a date 2.1.2002, which is a date without meaning. The letter further states that the decision to renew is conditional upon RPJ performing all its joint venture agreement obligations as contained in the written agreement dated 5.6.2002.
Above all, and this is of the utmost importance, the letter is not written to or given in favour of RPJ, but given in favour of UPSMDC.
UPSMDC and UPSIDC, Minerals Division and all, are instrumentalities of the State of U.P. The State of U.P. has categorically decided not to undo the big sale, which has produced Rs.459 crore for being absorbed in the industry; there was no other higher offer coming. This sale is sought to be undone by cutting away a chunk, which was submitted to be the most important chunk of the Kajrahat Mining Limestone line of mines. On the basis of this sole and single document of 25.2.2006, if we were to permit the appellant to have any relief, we would in effect be ruling that the appellant has a right to have specific performance against the UPSMDC causing them to sue the State Government; the suit would be for the purpose of obtaining specific performance of the renewal; further that such suit is to be decreed even though the UPSMDC has shown absolutely no intention of either obtaining a renewal or going against the decision of the State Cabinet, which it cannot.
The State Cabinet did not decide specifically to include blocks 5, 6 and 7 in the properties to be put for sale in 2001 which was wrongly submitted before the Hon'ble Single Judge but the Cabinet had never gone against the publication of the Memorandum of Information in 2001 which included the said three blocks; it has also categorically affirmed all the proceedings on the 10th  of October 2006. In regard to the aforesaid paragraph 58, we merely want to state this that the two sentences written by his Lordship therein are to be read together and UPSMDC and RPJ Minerals shall not be allowed any mining activities in the areas mentioned only in so far as those are contained in the properties sold to JAL on the basis of the Company sale approved and confirmed as stated hereinbefore.    
Before we part with this case, we wish to make it plain that this is not a writ matter. We are concerned with basically private litigation although the Mines and Minerals Regulations and Development Act, 1957 and the Mineral Concession Rules of 1960 are there in the background and any person having locus standi can raise points about that Act and those rules as and when such points practically arise, and not merely because some litigation is thought to be more beneficial to this business house or that business house.
In brief this was a private litigation between the two business groups RPJ and JAL; RPJ has a joint venture with UPSMDC, which is going on. There is nothing in their agreement (see page 196 paragraph 18 of the agreement dated 5.6.2002) more than this that UPSMDC is to bring to RPJ the mining leases, which it obtains on approval by the State; there is nothing in the agreement to indicate that UPSMDC (i.e.  the State) will do all it can to increase the basket for RPJ as much as it can, so that RPJ can increase its mining activities. In the face of this agreement and this clause which must be taken to be referred to in the said letter of 25.2.2004, we are really at a loss to understand how we could hear this appeal for so long and stall the disbursement of Rs.459 Crore and the starting of mining operations by the rightful party, which should be done as expeditiously as possible.
Apart from the said clarification with regard to paragraph 58, the appeal is dismissed.
Dt: 27.10.2006
HIGH COURT OF JUDICATURE AT ALLAHABAD
AFR
Court No. 32
Special Appeal No. 1341 of 2007
U.P. Industrial Cooperative Association Ltd.
Vs.
Official Liquidator, Attached to Hon'ble High Court of Judicature at Allahabad
Hon'ble S. Rafat Alam, J.
Hon'ble Sudhir Agarwal, J.
Heard Sri V.K. Birla, learned counsel for the appellant and Sri Ashok Mehta, learned counsel appearing for the Official Liquidator.
This appeal under Section 483 of the Companies Act read with Chapter VIII Rule 5 of the High Court Rules has been preferred against the order dated 17.09.2007 passed by Hon'ble Company Judge rejecting the application of U.P. Industrial Cooperative Association Ltd. (hereinafter referred to as the "appellant") claiming for deduction of the amount of loan as a result of credit sale to the workman of the company and pay directly to the appellant.
It appears that certain goods were provided on loan to the workman of M/s U.P. State Cement Corporation Limited (hereinafter referred to as the "Company") and for payment of the cost of such article the procedure adopted was that the amount was to be paid in six instalments to the appellant by making deduction from monthly salary of the concerned workman, by the Company, and was to be paid to the appellant directly. Since the regular monthly salary of the workman itself could not be paid by the Company, the amount of loan instalments also could not be paid to the appellant. The appellant submits that as a result of auction of the Company, the amount of wages are being paid to the worker by the Official Liquidator and from that amount his dues should be deducted and be paid directly by the Official Liquidator to the appellant. The Hon'ble Single Judge has rejected the application on the ground that since the 'workman dues' are to be treated as overriding preferential payments under Sections 529, 529A and 530 of the Companies Act, 1956 (hereinafter referred to as the "Act") and the dues of the appellant being unsecured debts, the appellant cannot be paid the said dues by the Official Liquidator.
Sri Birla placing reliance on a judgment of Hon'ble Gujarat High Court in Baroda Spinning & Weaving Mills Co. Ltd. Vs. Baroda Spinning & Weaving Mills Co-operative Credit Society Ltd. and another, 1976 (46) Company Cases, 1 and earlier order of the Hon'ble Single Judge in Misc. Company Application No. 4 of 1997 in the matter of M/s U.P. State Cement Corporation Ltd. passed on 27.04.2007 contended that the amount of the appellant was a 'money in trust' lying with the Company and therefore, it did not fall in the category of secured or unsecured debts and in fact falls in a third category i.e. 'money in trust' and was liable to be paid by the Official Liquidator directly. The learned Single Judge, be contended, has erred in law in rejecting the application ignoring the said legal position.
However, we do not find any force in the submission in view of the specific provision of Section 529 A of the Act which has been inserted by Companies (Amendment) Act 1985 and reads as under:-
"529A (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company-
(a) workmen's dues; and
(b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues,
shall be paid in priority to all other debts.
(2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions."
The 'workmen's dues' has been defined in sub-Section 3(b) of Section 529 which has also been inserted by Companies (Amendment) act, 1985 and reads as under:-
"3 (b) "workmen's dues", in relation to a company, means the aggregate of the following sums dues from the company to its workmen, namely:-
(i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman, in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947);
(ii) all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order of resolution;
(iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen's Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company;
(iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company;"
It is not disputed that the entire amount which was liable to be deducted from the wages payable to worker comes within the definition of 'workman dues' and therefore, it was liable to be paid full as provided by sub-Section 2 of Section 529 A of the Act.
In Baroda Spinning & Weaving Mills (Supra) the Hon'ble Gujarat High Court has considered this issue in 1975 when Section 529 A of the Act was not on the statute book and the definition of 'workmen's dues' contained in Section 529, which was inserted in 1985 was also not there. The controversy came up for consideration before the Hon'ble Gujarat High Court was at the time when statutory provisions were existing differently and, in our view, in view of the specific provision contained under Section 529 A of the Act, there is no scope to take a different view than what has been held by the Hon'ble Single Judge in the judgment impugned in this appeal.
So far as the order of Hon'ble Single Judge relied upon by the appellant having been passed earlier, firstly we find that the Hon'ble Company Judge therein had not taken into account Section 529 and Section 529 A of the Act and further the Cooperative Society which came up for consideration earlier before the Hon'ble Company Judge was U.P. Cement Vetanbhogi Rin Samiti Ltd., Churk and was a Cooperative Society of the workmen of the Company itself established for there welfare. Since the said society was confined to the workman of this very Company, the Hon'ble Company Judge passed the said order. It cannot be said to be a binding precedent or the law laid down on the subject concerned, particularly the issue involved in the present appeal.
We are, therefore, of the opinion that the two judgements relied by Sri Birla, learned counsel appearing on behalf of the appellant do not help him in any manner in view of the facts and circumstances and the statutory provisions applicable in the case in hand. We are in respectful agreement with the view taken by the Hon'ble Single Judge and do not find any reason to interfere in the judgement under appeal. The appeal, therefore, lacks merit and is accordingly dismissed.
Dt/-29.10.2007


In Re: U.P. State Cement Corporation Ltd. (In Liq.) vs on 27/4/2007
JUDGMENT
Sunil Ambwani, J.
1. In these proceedings, the Company Court is called upon to decide Applications/Objections/Appeals under Rule 164 of Companies (Court) Rules, 1959 in the matter of the report of the Official Liquidator. Liuir Pradesh adjudicating on the 'proofs of debts' and proposing to distribute the sale proceeds of the assets of the U.P. State Cement Corporation I united in liquidation) wound up by the Court on 8.12.1999 on the recommendation of Board of Industrial and Financial Reconstruction, by the workmen, secured and unsecured creditors, U.P. State Electricity Board, Employees Provident Fund and others. A total amount of Rs. 459 crores received by the Official Liquidator from the sale of the assets of the Corporation (in liquidation) including the reliefs and concessions given by the State Government is under consideration of the Court. The hearing of these objections/appeals started on 3.1.2007 and was concluded on 6.4.2007.
THE BACK GROUND
2. 'U.P. State Cement Corporation Limited' (in liquidation) a Government Company under Section 617 of the Companies Act; 1956 with the entire paid up share capital subscribed by the Government of UP (GUP) made a reference to Board of Industrial and Financial Reconstruction (the BIFR) under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act 1985 (SICA). The reference was registered on 10.7.1992. The company had accumulated losses to Rs. 180.13 acres as against its paid up capital of Rs. 68.29 crores. The losses increased to 319.81 crores as on 31.3.1994 and to Rs. 548.85 crores as on 31.3.1998. The BIFR declared the company as 'Sick Industrial Company' on 7.10.1992 and appointed the 'Industrial Development Bank of India' (IDBI) as 'Operating Agency'. After exploring all the possibilities of rehabilitation revival, change of management and allowing opportunity to the workmen, banks and financial institutions as also considering the proposals made by Cement Manufacturing Companies, the Board formed an opinion under Section 20(1) of the SICA, to recommend, to wind up the company and for warded the reference dated 2.7.1997 to the High Court. The reference was received in the Company Section of the Court on 16.7.1997 and was registered as Misc. Company Application No. 4 of 1997.
3. The notices were issued on 3.9.1997 to the Company to show cause as to why the winding up order may not be passed. Shri Shiv Naih Singh, Advocate filed his appearance for the company. An Application (A-5) tiled by him was put up for orders by office report dated 15.10.1997. On the same date, the Court noticed that the workmen had preferred an appeal before Appellate Authority of Industrial and Financial Reconstructions (AAIFR) which was admitted and that the operation of the order of BIFR was stayed. The matter was adjourned for three months to enable learned Counsel for respondent-company to inform the Court the status of the appeal. The matter was thereafter adjourned from time to time. The appeal, against the order of reference dated 2.7.1997 filed on 8.8.1997, was dismissed by AA1FR on 19.2.1998.
4. The Cement Workers Union (CWU) and 13 other trade unions filed Writ Petition No. 15134 of 1998 challenging the order dated 19.2.1998 passed by AAIFR. The writ petition was opposed by Government of U.P. (G-UP) on the ground that it was not possible to run the company with about 6000 employees. The writ petition was connected with M.C.A. No. 4 of 1997. The court heard the arguments on 23.11.1998 and then on 25.2.1999. On 8.12.1999, the Court dismissed the application of Allahabad Bank to exempt the hypothecated properties under the agreement with the Corporation dated 31.3.1982 on the ground that as secured creditor the bank will have preference in realization of amount under Section 529A of the Companies Act, 1956 (the Act). On the same day, on 8.12.1999 the Court accepted the reference made by BIFR and directed the company to be wound up. The writ petition No. 15134 of 1998, filed by Cement Workers' Union and Ors. was allowed in part. The application by the Class-I and Class-11 employees of the Corporation, was disposed off with following directions:
This is an application filed by 37 persons claiming to be class I and class II employees of U.P. State Cement Corporation Ltd. (in short the Corporation).
The applicants have, made the prayer that the Corporation be directed to pay arrears of salary as per the revised pay scale and dearness allowance up to the date with 18 percent interest per annum on the accumulated arrears from the date the amount jell due nil the date of actual payment bedsides contribution to the employees provided fund trust. They also prayed that the State Government be directed to provide alternative employment on equivalent post under the State and allow them to continue the enjoyment of free residential accommodation with electricity, water supply, medical aid etc. The Board for Industrial and Financial Reconstruction (in short the Board) has submitted its opinion for winding up of the Corporation. This opinion has been affirmed by the Appellate Authority in appeal. I have accepted the opinion of the Board and have directed for winding up of the Corporation. As regards the various reliefs claimed in the application, they cannot be granted in this company application. If the applicants have any right, they can claim such relief in the appropriate proceedings before the appropriate authors: The application is accordingly disposed of.
5. The relevant part of judgment for these proceedings, allowing the writ petition No. 15134 of 1998 filed by Cement Workers Union and Ors. reported in 2000 (100) CC 76, is:
The financial institutions had given loan and the interest payable to them are heavy. The Board examined all the aspect. The court in this petition cannot substitute its own opinion. After examining the entire material in relation to the functioning of the sick company the BIFR has submitted its opinion that it is just and equitable to wind up the company. I do not find that the opinion submitted by the board is perverse or there is any justifiable ground not to accept the same.
In the last, learned Counsel for the petitioner submitted hat the workmen had been working in the sick unit. They are entitled to wages till the winding up order is passed. This submission was also raised before the Board and it noted the submission in its meetings held on September 26, 1996, and observed as follows:
In case the State Government decide to Wind up the Corporation they should do so and pay all the dues of the labour. The present Government has different policy regarding sick P.S.Us. As compared to the previous Government and the workers are hopeful that a favourable view will be taken in tins case.
There is no reason why the workers be not paid their salary. In view of the above discussion the writ petition is dismissed against the recommendation of the Board dated February 6, 1997, and the order of the Appellate Authority dated February 19, 1998. The writ petition, in so far as the direction in the nature of mandamus commanding respondent No. 4 to make payment of all dues to the workmen for the period till today, is allowed. In case respondent No. 4 is not able to pay the amount, on winding up of the Corporation, the payment shall be made to the workers prior to making any payment to arc person in accordance with Section 529A of the Companies Act, 1956. The writ petition, as against the other reliefs claimed in the writ petition is hereby dismissed.
The parties shall bear their own costs.
6. A Special Appeal No. 38 of 2000 filed by Cement Workers' Union was dismissed on 31.7.2000. The Official Liquidator, U.P. was appointed by the Court as Liquidator of the company. He sent notices to the company to file the 'Statement of Affairs' and to hand over the possession of the assets. The minutes of the meeting held on 24.3.2000 in the chambers of the Managing Director, U.P. State Cement Corporation, Lucknow, both with regard to filing of 'Statement of Affairs'; handing over possession and the business of the company are quoted as below:
MINUTES OF THE MEETING HELD ON 24.3.2000
IN THE CHAMBER OF MANAGING DIRECTOR, U.P.
STATE CEMENT CORPORATION LTD., LUCKNOW
PRESENT:
1. Sri Harbhajan Singh Managing Director
2. Sri G.S. Rai I/c General Manager, Churk
3. Sri J.L. Srivastava I/c General Manager, Dalla
4. Sri R.D. Singh1/c General Manager, Chunar
5. Sri Yashpal Sharma Company Secretary/JHM (F)
6. Sri J.K. Singh Sr. Personnel Officer-HQ
At the outset, Managing Director explained that lie meeting was called to discuss/review important issues and problems at the Units/HQ after the winding up orders of the Corporation passed by Hon'ble High Court, Allahabad on 8.12.1999. In this background, following issues/points came up for discussion.
1. M.D. informed that despite his written request and awareness of the urgency and importance of submission of 'statement of affairs' of the Corporation with the Official Liquidator in form of the orders of the Hon'ble High Court, Allahabad within the specified time period of 3 months, General Managers of the units did not bother to provide requisite information required for the purpose. What was really made surprising and disheartening in that event the General Managers did not consider it necessary to acknowledge the letter sent by the Managing Director on this account. Therefore, under the circumstances and absence of requisite information from the units, the management had no option but to compile the statement of affairs on estimated basis with whatever little information was available at Luc know and with the help and advice of the outside consultants at Kanpur. The statement of affairs prepared and compiled on the aforesaid basis has been submitted to the Official Liquidator on 6.3.2000.
Further, in this context it was informed that essential/emergent expenditures incurred by the Units/HQ/CMO after 8.12.1999 upto 7.3.2000 is required to be submitted to the official liquidator for his approval and hence as already requested requisite information sought on this account be submitted without any further loss of time so that a consolidated statement for the Corporation as a whole may be submitted to the Official Liquidator for record and approval. Further, it was also made, clear that henceforth the expenditure whatever should be incurred by the Units/HQ and Bank account of the Corporation may not also be operated. However, a statement showing minimum estimated expenditure for the coming period may be finalized by the Units/HQ so that it may be submitted to official liquidator for looking his approval.
2. It was informed that the Board while reviewing the progress of the winding up and problems of the Corporation in its meeting held on 22.3.2000 desired that immediate steps may be taken to ensure the following:
(a) The unit management should take all possible measures at its level to protect and safeguard the various movable and immovable, properties/assets of the Corporation. Assistance/co-operation of the district Administration may be taken promptly wherever required.
(b) The annual accounts of the Corporation may be finalized on top priority by constituting a team at the Unit/HQ level.
(c) All important cultural functions be attended to by the management till unit is finally taken over by the Official Leqidator.
3. Regarding the insurance of assets of the Chunar unit, it was decided that a letter may be sent to the Official Liquidator immediately for seeking his orders for release of funds to insurance company by the State Bank of India, Robertsganj.
4. Managing Director emphasized that it is in the interest of the concerned particularly employees/officers of the Corporation to attend to all the important functions till such time the Corporation is taken over by the Official Liquidator and in this respect all legal cases wherever pending may be contested in the best possible manner.
Various issues raised by the General Managers in regard to day-to-day management at the Units were discussed and clarified by the Managing Director.
(Harbhajan Singh) 1.4.2000
Managing Director
No. MD/LKW/105
Copy for information and necessary action.
1) General Manager, Churk/Dalla/Chunar
2) Company Secretary
3) Manager (F&A)-HQ
4) Manager (Marketing)
5) Sr. Personnel Officer-HQ
6) Accounts Officer-CMO
(Harbhajan Singh) 1.4.2000
Managing Director
7. A 'Statement of Affairs' verified by Shri Yashpal Sharma, Company Secretary of the Company (in liquidation) was filed on 6.3.2000. The possession of the assets, however, could not be taken by the Official Liquidator (OL). On 25.7.2001, the Court directed the O.L. to take over possession of the assets of the Company (in liquidation), spread over 80 kins including mines, factories, colonies etc. in the districts of Mirzapur and Sonbhadra. The District Magistrates, Allahabad, Sonbhadra and Mirzapur were directed to provide security to the OL on his proposed visit on 27.7.2001. The District Magistrate, Mirzapur and Sonbhadra informed the OL that the inventories of the assets have been prepared and that the OL can take charge. Dr. Hari Krishna, Secretary Industrial Development Department, Government of U.P. also informed the OL on 19.7.2001 that the District Magistrates are ready to hand over charge to the OL. The OL formally took over charge of the assets of the Company (in liquidation) on 31.7.2001. Under the orders of the Court, the District Magistrate, Mirzapur and District Magistrate Sonbhadra were given supurdgi of the assets.
8. An application No. 47788 of 2001 (A-31) was filed by the Slate Government on 15.7.2001 to direct the OL to take appropriate steps in the light of the order passed by the Court on 8.12.1999 and to give due consideration to the offer made by M/s Grasim Industries Ltd. so that liability of the company may be discharged and the interest of workmen and other staff be protected. The Allahabad Bank-a secured creditor opposed the application supported by the affidavit of Shri Hari Krishna, the Secretary, Heavy Industries, Government of U.P. Lucknow. It was staied that the advertisements were published by the State Government in newspapers inviting tenders for taking over cement plants of the company (in liquidation). These advertisements were published in 'Economic Times' and 'Business Standard' dated 10.2.2001 and 12.2.2001 offering the assets and a number of reliefs and concessions to be granted by the State Government. The then Advocate General appearing for State Government submitted that the GUP adopted a transparent process of sale in which three Cement Companies initially showed interest. However, finally M/s Grasim Industries Limited made an offer for the assets totalling Rs. 241 crores. The Sale Committee comprising of Commissioner of Industrial Development as Chairman; the Secretary, Small Industries Development: the Secretary, Finance Department; the Secretary, Heavy Industries and Managing Director, UPSIDC processed the sale. The reliefs and concessions and the assets on offer were clearly stated in the advertisement and the 'Memorandum of Information' (MOI) including guidelines for submitting the tenders. The reliefs and concessions included the renewal of limestone leases in favour of the company. The State Government offered limestone leases of Ninjha and Kajrahat, with more than hundred million tones of limestone deposits adjacent to the mill factory side.
9. During the course of hearing, the Court summoned cabinet proceedings for appreciating concerns of the banks; financial institutions and the offer of M/s Grasim Industries Limited. After going through the entire proceedings, it was noticed by the Court in its order dated 14.2.2002, that after the winding up of the company, the assets can only be sold by the OL. The State Government, which is the promoter and holds the entire share capital, was not competent to advertise the assets for sale. The submission, that the recommendations to exclude 254 acres of land, building and factory at Churk and 564 acres of land at Ghurma from the sale of assets as limestone was not available at these places, valued at Rs. 30 crores, was not proper as the entire assets of the company (in liquidation) were to be sold. The submissions of Shri R.P. Goel, the then Advocate General, that the sale was fair and transparent, was not accepted and as such the sale could only be made by the OL under Section 457(1)(b) of the Act.
10. On an enquiry made by the Court, as to whether GUP will have no objection, if the Court explores the possibility for higher bid, the Advocate General submitted that in such case GUP will have no objection. The Court was not satisfied with the statement and required GUP to place on record the 'no objection1 in form of an affidavit. Shri S.N. Shukla, Industrial Development Commissioner, UP filed his affidavit dated 1.1.2002 in compliance with the order dated 2.1.2002. The contents of tins affidavit as reproduced in the order dated 14.2.2002 are:
(1) That the deponent is presently posted as Industrial Development Commissioner and Principal Secretary, Government of U.P. Lucknow and as such lie is fully acquainted with the facts deposed to below.
(2) That the present affidavit is being filed in compliance with the order dated 20.12.2001 passed in the aforesaid matter, by the Hon'ble Court.
(3) That the State Government's primary concern has been revival of unit at the earliest though privatization in the interest of the workers. The idea is not merely disposal of assets by their transfer to a purchaser who has the necessary resources, competence and experience to run the unit.
(4) That the offer of M/s Grasim Industries has been received after open public tender and they are one of the largest cement producers in the country.
(5) That the request made by the State Government to the Hon'ble Court was by way of helping and assisting the Liquidator in the disposal of the Company's property under Section 457(1)(c) to save time instead of initiating the process afresh at his level.
(6) That the State Government has no objection to this Hon'ble Court exploring the possibility of a higher bid and the State Government would in that event extend the same reliefs and concessions as those offered to M/s Grasim Industries. However, it is submitted that the following concerns of the State Government may kindly be also kept in view while taking a decision in this regard:
(i) The process of restarting the Unit may not get unduly delayed.
(ii) There is no guarantee for a higher bid and meanwhile we may loose the offer already received.
(iii) Besides, the bid amount, the resources, competence, experience and the commitment of the bidder to run the unit also has to be kept in view.
(7) That, however, in case it is decided to re-tender then the present offer of M/s Grasim Industries should remain valid and the amount offered by them should be kept as the minimum reserved price. Moreover in case any higher bid is received in all fairness M/s Grasim Industries may be given the first option to purchase the property at that price.
(8) That besides the State Government the consent of the Financial Institutions and Banks to extend similar accommodation the new purchaser is also necessary.
11. The Court did not accept the submissions that the sale of the assets of the company (in liquidation) under Section 446 of the Companies Act 1956 will take 20 years of time. It was noticed that the State Government was fully aware of the fact that the company was wound up and that all its assets were in possession of the Court under Section 456(3) of the Act. The application was consequently rejected with directions to constitute a 'Asset Sale Committee' (ASC) consisting of the OL as Chairman; a nominee of IDBI not below the rank of Deputy General Manager; a nominee of State Bank of India not below the rank of Chief Manager; Industrial Development Commissioner and Principal Secretary, Government of U.P. or his nominee not below the rank of Secretary in the Government of U.P. The sale was to be carried out by making wide advertisement in global markets after approval of draft advertisement from the Court. The tender document prepared by the State Government was to be considered as a basic document for such purpose with modifications and changes to be considered by ASC with approval of the Court. Apart from global tender, invitation was to be sent to all leading cement manufacturers in the country. All the prospective bidders, were to be allowed inspections and bids to be received in sealed covers with reserve price of Rs. 271 crores (Rs. 241 crores offered by M/s Grasim Industries Limited and the assets of Rs. 30 crores which were excluded by the State Government).
THE SALE OF ASSETS
12. The assets were valued by M/s A.F. Fergusan & Company in 1995. Shri N.K. Agarwal valued the assets in the year 2001. The Special Appeals were filed by the State Government; Allahabad Bank and M/s Grasim Industries Ltd. against the order dated 14.2.2002 rejecting the proposal of the GUP for accepting the sale in favour of M/s Grasim Industries Limited. In pursuance of the orders passed in Special Appeal, the assets were re-valued for the second time by G.S. Birdie in 2003. In the course of hearing of the Special Appeals, some offers and counter offers were made in the Court. The Bench, hearing the Special Appeal Nos. 271 of 2002 by Grasim Industries and Special Appeal No. 316 of 2003 by State of U.P., however, did not accept these offers and that on 20.12.2004 the Special Appeals were dismissed and all the matters were remitted to the Company Judge for carrying out advertisement and sale. On 28.4.2004, the matter was nominated to this Court by Hon'ble Mr. Justice T. Chaterji, the then Chief Justice of the Court.
13. The suggestion of IDBI to engage professional agency for sale of assets was rejected. The global advertisements were carried out in newspapers covering the entire globe. The advertisements were also placed on internet. On the recommendations of the ASC, the bid was invited in two parts. The bidders were required to submit 'Expression of Interest' with their qualifications, which were settled in the guidelines and which included expertise of the purchasers in manufacturing cement company and the financial capacity to pay the earnest money. The four bidders expressed their interest. The ASC in its meeting dated 4.12.2005 found that all the four bidders which had taken intensive inspections were qualified having a turn over of more than Rs. 1000 crores and expertise in manufacturing and sale. All the four bidders deposited Rs. 10 crores each as earnest money. Before the date of financial bidding dated 16.11.2005, the bidders made certain queries with regard to reliefs and concessions and delivery of physical possession of the assets and the benefits to be given to the ex-workmen. The Court found that tender document running to more than thousands pages with report of geological surveys and three valuation reports, disclosed all the details; the stage of further query was over and that the parties may bid on the material available on record. The ASC under the orders of the Court dated 5.10.2005 held its meeting to satisfy the queries. In the pre-bid meetings in the chambers dated 5.12.2005 and 16.1.2005, the Court satisfied some of the queries of the bidders. The matter was taken in Special Appeal. By a long and detailed judgment in Special Appeal No. 1465 of 2005 and all other connected appeals were dismissed by the Division Bench on 16.1.2006.
14. With the consent of all the parties, the matter was taken up in chambers for financial bidding. All the four bidders desired to submit bids in seal tenders and decided not to do competitive bidding. They were required and filed their Board resolutions that they will participate in the bidding only by sealed tender with no further competitive bidding. On 31.1.2006, the bids were opened in chambers. M/s Jaiprakash Associates Ltd. (JAL) with the bid of Rs. 459 crores was found to be the highest bidder, M/s Dalmia Cement (Bharat) Limited was the next highest bidder with an offer of Rs. 376 crores. M/s Lafarge (India) Private Limited with its bid at reserve price of Rs. 271 crores was found the third highest bidder. M/s Grasim Industries Limited did not offer any bid. The highest bid of JAL with a difference of Rs. 83 crores of the next bid was accepted by the Court. JAL deposited 25% of the offer on 15.2.2006 and made an offer to deposit the balance in three instalments, the last of which was to be paid on 19.9.2006. The offer was accepted with the condition that the JAL will furnish bank guarantee for the remaining amount. The required bank guarantee was furnished. The JAL deposited the first two instalments in time. The time for the third instalment due on 19.9.2006 was extended to 20.9.2006. The JAL deposited the last instalment on 11.10.2006 within the extended time and the sale was confirmed in presence and with the consent of all the secured creditors and the workmen appearing through their Union leaders and representatives.
15. In the meantime, the Court was engaged almost every week in the process and finalisation of provident funds account; taking over of the schools and hospitals, giving directions for summoning and preservation of records; for mapping and identifying the assets including mines spread over about 80 KMs area in Churk, Dalla, Ghurma and Chunar in the districts of Sonbhadra and Mirzapur.
16. After the deposit of the second instalment, the Court found that since it would take a long time for inviting and settling the claims of about 6000 workmen, secured and unsecured creditors and Government dues, directions were issued to the OL to advertise inviting claims under Rule 148 of the Companies (Court) Rules 1959 ( Rules of 1959). The last date for receiving the claims 'proof of debts' was extended upto 31.7.2006.
17. The Court appointed a Settlement Claims Committee (SCC) chaired by Shri K.P. Misra (HJS), retired District Judge, Shri Amit Ray & Company, Chartered Accountant and Shri Shahid Kazmi, Advocate and provided them office space in the office of the OL, computers and requisite staff to assist OL to adjudicate the claims. The SCC collected all the claims, classified and categorised them and after seeking clarifications from the OL and the Court, prepared a report in 122 days and submitted the same to the Court on 2.12.2006. There were certain clerical mistakes, which were corrected in the corrected report dated 4.12.2006.
18. The sale was confirmed on 11.10.2006. The court accepted the reports submitted by the SCC, which were duly considered, approved and forwarded by the OL with his report No. 348 of 2006, to be advertised inviting objections. The order dated 4.12.2006 inviting objections is quoted as follows;
Present Shri Ashok Mehta, learned Counsel appearing for the Official Liquidator, Shri S.K, Saxena, the Official Liquidator (OL) and Shri B.K.L Srivastava, Deputy Official Liquidator, and the members of the Liquidation Claims Committee, Shri K.P. Misra (Retired District Judge), the Chairman of the Committee, Shri Amitava Ray, the Chartered Accountant and Shri Shahid Kazmi, Advocate, members.
The U.P. State Cement Corporation (In Liq.) was wound up by this Court on 08.12.1999. The application of the State Government for sale through the advertisement carried out by the State Government was rejected on 14.2.2002, with direction to constitute an Asset Sale Committee and then invite expression of interest for tenders by global advertisement. The order was stayed in Special Appeal for about two years. The Special Appeals were dismissed in January, 2006. The Court, thereafter, constituted an Asset Sale Committee (ASC) including the representative of the State Government and creditors, and invited, 'expression of interest', by making advertisements covering entire globe. The modalities of sale recommended by ASC were worked out and finalised. The OL then invited expression of interest by making global advertisement with reserve price of Rs. 271 crores and earnest money deposited of Rs. 10 crores.
The ASC received expression of interest from five major players out of which four were shortlisted as they were found to possess qualifications for bidding. The bidding preceded applications for further clarification. The matter again went up in Special Appeal. The Special Appeals were dismissed on 16^th January, 2006. The bids were opened on 30.1.2006. M/s Jaiprakash Associates Ltd. was declared to be highest bidder with an offer of Rs. 459/- crores for the entire assets on, as is where and whatever there is basis with the second highest offer of Rs. 376/- a res. The highest bidder requested for time to pay the entire amount in four installment, the last of which was to fall on 15^th Sep. 2006.
The last installment was received and the sale was confirmed on 11.10.2006. The Court expected thousands of workmen, creditors and unsecured creditors to make their claim, and thus advertisements were made inviting claims by 15^th June, 2006 before confirmation of sale, which was extended upto 3L7.2006.
A Liquidation Claims Committee (LCC) was constituted for assisting the Official Liquidator with special staff and office automation to complete the task.
The OL's report No.348 of 2006 presented today, in pursuance of the order passed on 29.11.2006, has accepted the recommendation of the final report of the LCC for settlement of the claims, to be accepted by the Court.
The Claims Committee has submitted a report in two envelopes, which is placed today in chambers under sealed cover.
The main features of the report in paragraph 7 to 15 are as follows:
7. That the position of claims received, rejected, admitted, amount claims and amount admitted as per Section 529A, 530 have been given in detail with the amount in the report.
8. That the main feature of the report has been found that tin Committee has also considered three months salary as retrenchment compensation as per Section 25FFF of the Industrial Disputes Act, 1947 and gratuity. Further in order to maintain uniformity the Committee ha-, decided to grant Rs. 2299/- as Bonus to all workmen due to which the amount admitted for payment have become more in some of the cases than the amount claim by the workmen.
9. That the retired employees have been considered by the Committee for statutory retirement benefits on the basis of the order passed by Hon'ble Supreme Court, Hon'ble High Courts, other Courts, Industrial Tribunals and Arbitrators.
10. That there were only six secured creditors i.e. (1) IDBI (2) LIC (3) IFCI (4) State Bank of India (5) Allahabad Bank and (6) Kotak Mahindra Bank Ltd. (for ICICI).
11. That the secured creditors have been allowed interest @ 11% upto the date of winding up order and thereafter @ 4% upto 31.7.2006.
12. That the claim of U.P. Power Corporation has also been considered by the Claims Committee. Since no proper documents regarding total power units consumed was available, the Committee has considered the claim of U.P. Power Corporation @ 50c/c of the arrears so claimed upto 31.3.1999 and from April 1999 to May 20U6 it has considered to pay 60c/c of the amount for Dalla residential colony. For other units of the company at Churk and Gurma colony the committee has considered to pay 60% of the claim against the units of electricity consumed.
13. That as regards to Mirzapur Division which is having Chunar residential colony and water pump the committee has recommended 100% of the claimed amount for power consumption.
14. That in regard to gratuity to employees the Committee has recommended payment of 3,50,000/-.
15. That as regard to unsecured creditors the Committee appears to have considered only principal amount and the interest has not been accepted for payment.
The Official Liquidator with the help of the Liquidation Claims Committee considered 6210 claims including the claims of 5918 Workmen; 3 claims of EPF Commissioner; 6 of secured creditors; 3 of Employees; 111 of Government; 1 of UPPCL and 168 of unsecured Creditors. It has rejected the claim of 393 workmen, 14 of Government and 31 of unsecured creditors. Out of total amount claimed of Rs. 14,74,47,44,498/- (Rupees one thousand four hundred and seventy four crores forty seven lacs, forty four thousand four hundred and ninety eight), recommendations have been made to pay the dividend of total amount of Rs. 03,21,04,55,294/-(Rupees three hundred and twenty one crore four lacs fifty five thousand two hundred and ninety four).This leaves balance of Rs.01,13,95,44,706/- (Rupees one hundred and thirteen crores ninety five lacs forty four thousand seven hundred and six) with the Official Liquidator.
Out of total sale proceeds of Rs. 459 crores, the Official Liquidator has considered Rs. 435 crores for distribution. The remaining amount is required for taxes, Government fee, commissions, security expenses, advertisement, staff salary and other expenses.
Rule 163 of the Companies (Court) Rules, 1959 provides for communication of acceptance of objection of the proof:
Rule 163 : Acceptance or rejection of proof to be communicated - After such investigation as he may think necessary, the liquidator shall in writing admit or reject the proof in whole or in part. Every decision of the Liquidator accepting or rejecting a proof either wholly or in part, shall be communicated to the creditor concerned by post under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is rejected wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the Liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance. Where the Liquidator rejects a proof, wholly or in part, he shall state the grounds of the rejection to the creditor in Form No. 69. Notice of admission of proof shall be in Form No. 70.
Though workmen are also creditors it is neither practical nor feasible to communicate the admission or rejection of the claims to each of the 5525 workmen, whose claims have been admitted and 393 workmen, whose claims have been rejected. The Court, therefore, in exercise of power under Rule 6 read with Rule 9 of the Companies (Court) Rules, 1959, directs that all the workmen, whose claims have been admitted or rejected may be communicated of the order, by publication in leading newspapers in the area, with a right to inspect the reasons for rejection or admission of their claim in whole or in part. In case an individual workman requires such admission or rejection in writing, he shall be given the same by the Official Liquidator within 48 hours.
With regard to all other categories of claims including EPF Commissioner, secured creditors, employees, Government, UPPCL and unsecured creditors, the order of admitting their claim to proof either whole or in part or the rejections, either whole or in part shall be individually communicated. The admission of their claim to proof shall be communicated by certificate of posting and the rejection by registered post along with Form No. 69 or Form No.70 as the case may be. The Official Liquidator has requested for one week rime for this purpose. Let the advertisement be made and the UPC covers and registered covers be sent on or before 11^th December, 2006 inviting objections by 26^th December, 2006. The communication shall also be made on the notice board of the factories in Dalla, Churk, Chunar and Gurma.
All the objections shall be compiled, categorised and placed before the Court on 03.1.2007.
In case any workmen or creditor wants to accept the amount admitted to proof, without any objections and gives a certificate that he is accepting the amount in full and final payment, and shall not make any objection to the same, shall be paid the money by account payee cheque. In case of workmen occupying the quarters, these cheques shall be given as and when they vacate the accommodation and give proof of the vacation and the accommodation taken over jointly by the representative of the Official Liquidator and J.P. Associates Ltd.
The Court expresses its deep appreciation to the Official Liquidator, his staff; the Liquidation Claims Committee and its staff' for completing the task of accepting, categorising, adjudicating and deciding the claims submitted by 6210 claimants within the period of 124 days. They have done a commendable job, for expediting the payments to the workmen and creditors, who have been looking for the settlement of their dues for last seven years.
List in chambers on 03.1.2007 at 2.00 p.m.
19. The hearing on the objections/Appeals under Rule 164 of the Companies (Court) Rules 1959 commenced on 3.1.2007 and has proceeded on day-to-day basis. The Court has heard Shri P.N. Saxena, Senior Advocate assisted by Shri Amit Saxena; Shri B.D. Mandhyan, Senior Advocate assisted by Shri Satish Mandhyan; Shri Umesh Narain Sharma, Senior Advocate, assisted by Shri Chandan Sharma, Advocate; Shri V.K. Upadhyay, Shri Ravi Kant, Senior Advocate assisted by Shri Ajai Krishan for the workmen.
THE 'RELEVANT DATE' ON WHICH THE DISTRIBUTION OF DUES HAVE TO BE CONSIDERED.
20. The winding up of a company by the Court shall be deemed to commence under Section 441(2) of the Act, at the time of presentation of the petition for winding up. In case of a reference under Section 20(1) of SICA by the BIFR, the winding up commences on the date when the Company Judge applies his mind to initiate proceedings relying on the order of BIFR. In NGEF Ltd. v. Chandra Developers (P) Ltd. and Anr. the Supreme Court held in para 50 as follow s:
50. We may, however, observe the opinion of the Division Bench in PEL Ltd. to the effect that the winding -up proceeding in relation to a matter arising out of the recommendations of BIFR shall commence only on passing of an order of winding up of the Company may not be correct. It may be true that no formal application is required to be filed for initiating a proceeding under Section 433 of the Companies Act as the recommendations therefore re made by BIFR or AAIFR, as the case may be, and, thus, the dote on which such recommendations are made, the Company Judge applies its mind to initiate a proceeding relying on or on the basis thereof, the proceeding for winding up would be deemed to have been started; but there cannot be any doubt whatsoever that having regard to the phraseology used in Section 20 of SICA that BIFR is the authority proprio vigore which continues to remain as custodian of the assets of the Company till a winding-up order is passed by the High Court.
21. In the present case, the reference dated 2.7.1997 under Section 20(1) of SICA to wind up the Company (in liquidation) was received by the Court on 16.7.1997 and was registered as Misc. Company Application No. 4 of 1997. The Court, by its order dated 3.9.1997, applied its mind to the report and directed notices to be sent to the U.P. State Cement Corporation Ltd. (in liquidation) by registered/AD fixing 15.10.1997. The proceedings, however, were adjourned on 15.10.1997 on information that the order of BIFR has been challenged in AAIFR and that its operation was stayed. The appeal was thereafter dismissed by AAIFR on 19.2.1998. The winding-up in this case as such shall be deemed to commence on 3.9.1997 when the Company Judge applied his mind and issued notices to the Company (in liquidation) to show cause as to why it should not be wound up.
22. On making of a winding up order, the petitioner in the winding up proceedings and the company is required under Section 445(1) to file a certified copy of the order within 30 days with the Registrar of Companies. Sub-section (3) of Section 445 provides that such orders shall be deemed to be notice of discharged to the officers and employees of the Company except when the business of the company is continued. Section 445 of the Act is quoted as below:
445. Copy of winding up order to be filed with Registrar - (1) On the making of a winding up order, it shall be the duty of the petitioner in the winding u proceedings and of the company to file with the Registrar a certified copy of the order, within (thirty days) from the date of the making of the order.
If default is made in complying with the foregoing provision, the petitioner, or as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each day during which the default continues.
(1-A) In computing the period of (thirty days) from the date of the making of a winding up order under Sub-section (1), the time requisite for obtaining a certified copy of the order shall be excluded.
(2) On the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made.
(3) Such order shall be deemed to be notice of discharge to the officers and employees of the company, except when the business of the company is continued.
23. In the present case, the company (in liquidation) had closed its mining operation and production of cement in all its factories before the commencement of the winding up proceedings. On the date of winding up order i.e. 8.12.1999 the business operations of the company were closed. The proceedings of the meetings of the Managing Director of the company with the General Managers of Churk; Dalla and Chunar units dated 22.3.2000 and 1.4.2000 do not show that the company (in liquidation) was carrying out any business. In the meeting dated 1.4.2000, it was noticed that the 'statement of affairs' was filed on 6.3.2000 and that union managements were directed not to make any expenditure whatsoever from the bank account of the Corporation. They were required to submit minimum estimated expenditure for approval of the OL. The unit managements were required to take all possible measures at their level to protect and safeguard the various movable and immovable properties/assets of the corporation and to finalise the annual account. The company was not carrying out any business on the date when the winding up order was made and as such the date of winding up shall be deemed to be the notice of discharged to the officers and employees of the company. The winding up order was not challenged in appeal and thus the winding up will take effect on the date it was made by the Court i.e. 8.12.1999.
24. The winding up order, under Section 446 of the Act of 1956, operates to stay all suits and proceedings by or against the company except leave of the Court. It has an effect under Section 447 to operate in favour of all the creditors, and all the contributories of the company as if it had been made on the joint petition of a creditor or of a contributory. The 'statement of affairs' is to be filed with the OL under Section 454 of the Act of 1956. The liquidator in a winding up by the Court shall have powers with the sanctions of the Court under Section 457 of the Companies Act 1956 to institute or defend, suit, prosecution, or other proceedings to carry on the business of the company so far as may be necessary for the beneficial winding up of the company to sell the movable and immovable properties or accountable claims of the company by public auction or by private contract with power to transfer the whole thereof to any person or body corporate or to sell the same or partial to raise on the security of the assets of the company, any money requested; or to do all such thing as may be necessary for winding up the affairs of the company and distributing its assets. The other powers to execute documents, inspect records, etc. are provided under Sub-section (2) of the Section 457. These powers are guided under Section 460 subject to directions that may be given by resolution of the creditors and contributories and under overall supervision of the Court. The OL is keeper of the records and subjects them to audit under Section 461 and 462 of the Act. The committee of inspections may be appointed under Section 464 under the orders of the Court. The general powers of the Court are given under Section 466 of the Companies Act which include the powers to stay the winding up proceedings and under Section 467 for settlement of the contributories and applications of the assets.
25. The Court may order the delivery of the property to the liquidator and to summon persons suspected of having properties of the company and for public examination of promoters and directors under Section 468, 477 and 478 of the Companies Act 1956.
26. The distribution of property of the Company (in liquidation) under Section 511 of the Act is subject to the provisions of the Act as to preferential payments, the assets of the company, shall on its winding up be applied in satisfaction of its liabilities pan passu and unless the articles otherwise provide be distributed among the members according to their rights and interest in the company. The proof and ranking of claims; application of insolvency rules; overriding preferential payments and preferential payments are provided in Sections 528, 529, 529A and 530 of the Act of 1956. Chapter-V provides for its applicability to every mode of winding up. The OL may call proofs of debts of creditor, notwithstanding that the accounts book contain the entries which prima facie satisfies him with the indebtedness of the company to the creditors. The provisions of the Act and the Companies (Court) Rules 1959 for payment to the creditors and the workmen which are also ranked as secured creditors with preferential rights, unsecured creditors and government dues are to be considered while deciding the objections to the report of the OL.
27. The claims of the secured creditors, workmen, unsecured creditors, government dues, and employees provident fund have to be considered out of the realization of the assets of the company. The expenses for liquidation including security, valuation, advertisement, expenditure of Asset Sale Committee and on Liquidation Claims Committee, litigation expenses, audit fees, income tax, maintenance and all other expenses which were necessary to be incurred for maintenance of the assets including watch and ward, supply of water and electricity to the colonies, salary and other expenses of teachers and the medical facilities offered to the 6000 employees living in factories colonies, is the first charge on the assets of the Company (in liquidation) under Rule 338 of the Companies (Court) Rule 1959 made by Hon'ble Supreme Court of India after consulting the High Courts under Sub-section (1) and (2) of Section 643 of Companies Act 1956. The Rules are supplementary to the Act of 1956 and provide for the statutory procedure for sale of assets and distribution of the proceeds of the sale. Rule 147 to 179 lay down elaborate procedure for estimating and finally assessing the company's liabilities as on the relevant date. The liquidator is required to give notice under Rule 148 of not less than 14 days fixed by the advertisement to be published in daily news papers, to prove their debts required under Rule 149. The proof is to be submitted on affidavit verifying the debts giving statement of account showing particulars of the debts and the vouchers by which the same may be substantiated. These affidavits are to be in Form-66. The workmen may, under Rule 152, submit one proof in Form 67 for all the claims annexing therewith a schedule setting forth their names and amounts severally due to them. Rule 154 provides that the value of debts and claims against the company shall, as far as it is possible, be estimated according to the value thereof on the date of the order of winding up of the company or where before the presentation of the petition for winding up. A resolution has been passed for voluntary winding up on the date of passing of such resolution. Rule 156 provides for interest to the creditors which shall not exceed 4% per annum to that date from the time when the debts or sum was payable. If the debt or sum is payable by virtue of written instrument at a certain time and if payable otherwise then from the time when a demand in writing has been made. Rule 156 providing for interest payable to the creditors including workmen and Rule 179 which provides for payment of subsequent interest from the date of winding up as follows:
156. Interest. On any debt or certain sum payable at a certain time or otherwise, whereon interest is not reserved or agreed for and which is overdue at the date of the winding up order, or the resolution as the case may be, the creditor may prove for interest at a rate not exceeding four per cent per annum up to that date from the time when the debt or sum was payable, if the debt or sum is payable by virtue of a written instrument at a certain time, and if payable otherwise, then from the time when a demand in writing has been made, giving notice that interest will be claimed from the date of demand until the time of payment.
179. Payment of subsequent interest. - In the event of there being a surplus after payment in full of all the claims admitted to proof, creditors whose proofs have been admitted shall be paid interest from the date of the winding-up order or of the resolution as the case may be, up to the date of the declaration of the final dividend, at a rate not exceeding 4 per cent per annum, on the admitted amount of the claim after adjusting against the said amount the dividends declared as on the date of the declaration of each dividend.
28. The OL is required to examine every proof of debt under Rule 159 and may summon any person for investigation under Rule 160. He may administer oath and take affidavits under Rule 161 and may accept or reject the proofs which shall be communicated under Section 163 to those whose claims have been accepted under Certificate of Posting on by registered post where proof is rejected wholly or in part. A creditor may appeal under Rule 164, if he is dissatisfied with the decision of the liquidator in respect of his proof, not latter than 21 days from the service of the notice upon him of the decision of the liquidator before the Judge. The OL is required to file proof and list of the creditors in Court under Rule 167 which shall be verified except in accordance with the order of the Court. The list can be inspected under Rule 169 and some times can be requested for verification of such proof. After hearing the evidence, which may be tendered the Court shall under Rule 174 adjudicate upon the claims and settle the list of creditors. Any mistake may be corrected on application of the liquidatoi under Rule 176. The power of condoning the delay is provided under Rule 177 of the Rules of 1959.
29. All the Company Appeals, under Rule 164 raising grounds by way of the objections to the reports submitted by the Official Liquidator with the help of the SCC regarding proof of debts, were heard for days altogether. Shri Ravi Kant, Senior Advocate assisted by Shri M.K. Pandey represented Udai Narain Singh and 75 other workmen of Churk and Dalla in Company Appear No. O-35/2007. Shri B.D. Mandhyan, Senior Advocate assisted by Shri Satish Mandhyan, appeared for 17 workmen including 12 of the hospital staffs. Shri P.N. Saxena, Senior Advocate assisted by Shri Amit Saxena appeared for nine workmen of Chunar and Dalla. Shri Ashok Kumar Srivastava appeared for Shri Raghunath Singh and 20 others of Dalla representing those who were engaged in supply of electricity and water to the residential colonies of the Company (in liquidation). Shri V.K. Upadhyay appeared for Umesh Vikram Singh. Shri Chandra Bhan Gupta for Dina Nath Chaube and Subhash claiming an amount payable to them under award for Adjudication Case No. 9 of 1984 by Industrial Tribunal dated 22.1.1985 including 122 workmen. Shri Ajai Krishna and Dipti Srivastava appeared in Company Appeal No. 0-28 by Paras Nath Cement Pvt. Ltd.-unsecured creditors. Shri W.H. Khan appeared for UP Power Corporation and Shri Dhananjai Awasthi for Employees Provident Fund Commissioner. Shri Ashok Mehta, representing Official Liquidator, in these proceedings has given valuable assistance to the Court. He was present throughout the hearing of the matters and he produced the relevant record, whenever required by the Court and was present during marathon hearing of the appeals.
30. As observed above, the claims of hospital staff and the employees concerning to watch and ward or deputed to supply water and electricity to the residential colonies shall be considered out of the liquidation amount which is first charge on the assets and has been separated from the distribution. Their claims, however, as workmen upto the date of winding up shall be considered by the Court.
THE WORKMEN OF THE CORPORATION (IN LIQ.)
31. The submissions by the learned Counsel for workmen raised following issues:
1) Whether the OL had committed errors in admitting of the claims of the workmen to proof?
2) Whether the Official Liquidator could have relied upon details of the pay scale submitted by Shri Harendra Pandey in Writ Petition No. 15134 of 1998 for admitting the claims of workmen?
3) Whether the workmen are entitled to any compensation for voluntary retirement claimed by them as VRS?
4) Whether the workmen are entitled to claim wages upto 31.7.2001 when the possession of the units was taken over by the OL?
5) Whether the workmen are entitled to any arrears of salary prior to 12.7.1998 when they received last salary from the grants given by the State Government?
6) Whether workmen are entitled to retrenchment compensation calculated at 15 days salary for every completed year of service or a fixed retrenchment compensation of three month's salary and under Section 28FFF of the Industrial Disputes Act 1947?
7) Whether the workmen are entitled to one month's notice pay treating them to be retrenched under Section 25F of the Industrial -Disputes Act 1956?
8) Whether the workmen are entitled to interest @ 12% or interest not exceeding the rate of 4% on the wages from the winding up till the last date of submission of proofs or any other date subsequent to thereof?
9) Whether the workmen are entitled to bonus in addition to the bonus of Rs. 2499/- awarded at flat rate for the year 1993-94?
10) Whether workmen dues are barred by limitation?
Issue No. 1:- Whether the OL had committed errors in admitting of the claims of the workmen to proof.
32. The SCC reports that many claims (proof of debt) made by the workmen were incomplete. The records of each unit after their identification were brought under the orders of the Court, under special security. The claims along with proof were verified with the help of records. Still many mistakes have crept in by way of bonafide errors. It appears either there were some mistakes in the claims forms or in the records and that it is also possible that while verifying the claims and punching them on computers some more mistakes crept in preparation of the report. The OL states that some of the mistakes were corrected before the final corrected report was submitted on 2.12.2006. He, however, candidly admits that there are some more mistakes, which are being worked out. He has submitted the detailed chart in which these mistakes have been corrected.
33. The mistakes, made by the SCC can be classified in the following categories:
a) Pay scale admitted of the workmen.
b) The calculation in gross wages.
c) The number of years the workmen had worked for the purposes of calculating retrenchment compensation and gratuity.
d) Duplicate claims by the wife/(sic) or heirs and legal representatives of the workmen who have since died.
e) The date of appointment and the date of retirement of the workmen.
34. The OL is directed to correct all the mistakes, which may have crept in verifying the claims. Let all these mistakes be removed in the final report which is to be prepared in pursuance of the directions, which are likely to be issued in operative portion of this order.
Issue No. 2: Whether the Official Liquidator could have relied upon details of the pay scale submitted by Shri Harendra Pandey in Writ Petition No. 15134 of 1998 for admitting the claims of workmen?
35. All tin learned Counsels appearing for the objectors/appellants submits that the manpower summary prepared and annexed along with affidavit of Shri Harendra Pandey in Writ Petition No. 15J34 of 1998 with regard to the categories of employees and the pay scales are admitted. They have not placed on record any other manpower summary of the workmen and employees of the company (in liquidation). This manpower summary also gives the gross salary drawn by the various categories of employees. The SCC has taken manpower summary annexed to the affidavit of Shri Harendra Pandey as the basis after verification from the records for verifying the claims of the workmen. The court does not find that the method adopted by the SCC was incorrect.
Issue No. 3: Whether the workmen are entitled to any compensation for voluntary retirement claimed by them as VRS?
36. The offer made by M/s Grasim Industries Limited to the State Government in pursuance of the advertisement made by the State Government included a package offered to the workmen and employees of the corporation towards voluntary retirement. The argument that workers are entitled to VRS proceeds on the basis of offer made by the Grasim Industries Limited. This offer was not accepted by the Court. The assets were thereafter put to sale and that the proceeds of the sale are available for distribution. In such case, the provisions of Sections 528, 529, 529A, 530 of Companies Act are applicable. The workmen have to be paid their dues. The word 'workmen' is defined under Section 529A(3)(a) in relation to a company, the employees of the company being workmen within the meaning of Industrial Disputes Act 1947. Sub-section (b) defines the 'workmen's dues' which include all wages and salaries, all agreed holiday remuneration and all sum dues to any workmen from provident fund, a pension fund, a gratuity fund or any other funds for the welfare of workmen maintained by the company. Section 529A inserted by the Act No. 35 of 1985 provides for overriding preferential payments and treats the workmen's dues and debts due to the secured creditors to the extent such debts rank under Clause (c) of the proviso to Sub-section (1) of Section 529 pan passu with such dues in priority to other debts. These debts are to be paid under Sub-section (2) in full unless the assets are insufficient to meet them in which case they shall abate in equal proportion. Section 530 provides for preferential payments. The employee in this section do not include workmen. The scheme of distribution of realized assets does not provide for any payment towards voluntary retirement. The compulsory winding up of the petition does not result into voluntary retirement of the workmen or employees. It amounts to closure of the industrial company by an order passed by the Court. In certain circumstances referred to under Section 433 of Companies Act 1956 or under Section 20 of SICA, there is no question of retirement in such case. The voluntary retirement scheme is worked out by way of an agreement with workmen in negotiated settlement. It is by way of offer and acceptance worked on : with the help of industrial adjudication. In case of distribution of assets subject to proof of claims to the workmen treated as a secured creditors in overriding preferential payments, the question of voluntary retirement does not arise.
Issue No. 4 : Whether the workmen are entitled to claim wages upto 31.7.2001 when the possession of the units was taken over by the OL?
37. The workmen are not entitled to wages or compensation after the date of winding up. In paragraphs 22 to 30 that the relevant date for distribution of the dues is the date when the company was wound up i.e. 8.12.1999. The workmen as such are not entitled to claim any amount after the date of winding up except those workmen who are engaged in protecting and preserving of the assets of the company (in liquidation) under the directions of the OL and the Court.
Issue No. 5 : Whether the workmen are entitled to any arrears of salary prior to 12.7.1998 when they received last salary from the grants given by the State Government.
38. Workmen and employees of the Company (in liquidation) were paid their last salaries upto 12.7.1998. The company was thereafter wound up on 8.12.1999. The statement of affairs was filed on 6.3.2000 and the Official Liquidator took possession of the assets on 31.7.2001 in pursuance of the order passed by this Court.
39. The demand of the workmen for arrears can be sub-divided into three categories:
a) Wage board arrears.
b) Awards of the Industrial Tribunal/Labour Courts/other Industrial Adjudicator? bodies which could not be implemented either because, the company (in liquidation) did not have sufficient funds or were stayed by the High Court.
c) Any other arrears.
a) Wage Board Arrears.
40. Shri P.N. Saxena, learned Senior Advocate appearing for nine workmen (six of Chunar and three of Dalla) submits that the Cement Union Manufacturer Association entered into Negotiations with the Workers Federation. The Negotiating Committee consisting of Shri N. Srinivasan and Shri A.L. Kapoor held prolonged discussions with Joint Negotiations Committee of Cement Workers, on 18 and 19^th June, 1996 at Mumbai. The agreement was incorporated into the 'Memorandum of Settlement' signed jointly by the representatives of the Cement Industry and Cement Workers' Federation before the Chief Labour Commissioner. Consequently the strike which was to commence from 24^th June, 1996 was called off. The memorandum of settlement provided for increasing basic wages; house rent allowance; conveyance allowance; education allowance; leave travel allowance washing allowance and dust allowance lo be made effective from 1.4.19%. The clearness allowance was fixed at AICP1 (1960 = 100) number 1500 at Rs. 2204.30 to be verified @ 2.05 per point for fall or rise would be paid above AICPI number 1500 ( 1950 = 100). Rate of Rs. 2.05 will be raised to Rs. 2.10 per point rise or fall from 1.4.1996. The existing method of calculation of dearness allowance on quarterly basis was to continue. The rate of increments in respect of various categories of employees to be given on the next due date of increment was provided in MOU with one annual graded increment for five years of service as on 1.4.1996 or two annual graded increments above 15 years of service 1.4.1996. The settlement benefits with previous settlement of Rs. 115/- was to be added in the basic wage as special pay namely 1.4.1996- Rs. 15/ on 1.4.1997 Rs. 40/-, on 1.4.1998 Rs. 30/- and on 1.4.1999 Rs. 30/-. The settlement was to remain valid for two years. The workmen of the company (in liquidation) entered into negotiation with the management and that by office Memorandum dated 12.3.1997, the then management of the company (in liquidation) agreed to implement Wage Board Award w.e.f. 1.2.1997. The demand for arrears of 10 months beginning from 1.4.1996 to 31.1.1997 was deferred subject to rehabilitation of the unit and improvement of the financial condition. It is relevant to state here that the matter was receiving consideration for rehabilitation in BIFR. The management and the workmen approached BIFR for implementation of the wage board award. The BIFR in its proceedings observed that BIFR has no role to play in the matter of settlement of upward revision of wages.
41. On 12.3.1997, the Management and the Workmen were competent to sit together and decide the question of implementation of the Wage Board Award. The workmen were represented by their authorized unions and thus the settlement was binding on all the workmen. The relevant part of the settlement, in the office Memorandum dated 12.3.1997 is quoted as below:
IV. Wage settlement - Implementation of Memorandum of understanding dated 12.7.1996
The trade union representatives stressed and urged for immediate implementation of Memorandum of Settlement dated 12.7.1996. They also mentioned that the B.I.F.R. Has also now clarified that management can take a decision on their own regarding the wage settlement. The union representatives were apprised that implementation of MOS will entail additional financial burden of Rs. 45 lakhs per month and about Rs. 5 crores towards payments of arrears. In the context of critical financial position of the Company and the difficulties being experienced in raising financial resources for the rehabilitation package, the management called upon the workers to do maximum sacrifies at this juncture to save the Corporation. In the process the workers may consider to forego some of the allowances increased in the MOS or to take them later on or forego the arrears accrued against MOS.
Appreciating the critical financial condition of the Corporation, the union representatives suggested that arrears equivalent to one month salary may be paid every month with current wages. It was explained to the union representative that in case the proposal for payment of arrears in instalments is agreed to, a provision for payment of the same along with the source for meeting this committed liability has to be shown in the rehabilitation package. In the context of every critical and light financial position and resources crunch it may not be possible to include this in the rehabilitation package.
After detailed discussions, the following agreement was reached upon between the management and the nominated union representatives:
(a) Payment of increased wages as per Memorandum of Settlement dated 12.7.1996 be implemented from the salary for the month of February 1997.
(b)The arrears for the period 1.4.1996 to 31.1.1997 against the MOS dated 12.7.1996 and all the arrears would be paid after implementation of the rehabilitation package. This will be decided after taking into account the financial position of the Company at that time and in consultation with the workers representatives. The union representatives also agreed that no dispute will be raised for the payment of arrears.
The union representatives further agreed that during the three years of implementation of rehabilitation package workers will not insist for any increase in wages, salaries etc. at local level/with the management.
Union representatives were impressed by the Management to dispel from their minds fear of any victimization pursuant to workers agitation for implementation of the MOS.
Since the rehabilitation package is still in the process of preparation and during this process various alternatives, views and difficulties may crop up and therefore, it was also agreed that till all the aspects of rehabilitation package are not finalised the process of mutual consultation will be continued. The union representatives assured the management of their full and positive cooperation in the process of finalization and implementation of rehabilitation package.
Now, therefore, in consonance with the agreement reached on 26/27.2.1997 with the nominated six representatives authorized by all the Trade Unions of the three units and pursuant to decision taken by the Board of Directors of the Corporation at the meeting held on 24.2.1996, observations dated 6.2.1997 of Hon'ble Bench III of B.I.F.R. (para No. 8) and the opinion dated 19.2.1997 of the Law Department, Government of UP, it has been decided to implement the Memorandum of Settlement under Section 12(3) and 18(3) of the Industrial Dispute Act, 1947 signed on 12.7.1996 by the CMA and Cement Workers before the Joint Chief Labour Commissioner (Central) New Delhi as under:
(A) The increase in Wage/benefits as per MOS at 12.7.1996 aforesaid, as per details given in para (6) below, will be given to all eligible employees of the Corporation from the salary for the month of February, 1997 and onwards.
(B) The arrears of Wage/benefits as per MOS at 12.7.1996 for the period 1.4.1996 to 31.1.1997 will be paid separately after completion of implementation of Rehabilitation plan of the Corporation, in instalments to be decided in consultation with the Trade Union representatives.
(C) The following benefits under the above settlement will be given to all categories of workers of the Corporation who have been covered by the Second Arbitration Award for Cement Industry.
(1) The total emoluments of all the eligible employees shall be increased by Rs. 890/- permonth with effect from J.4.1996, as follows:
a) Increase in Basic Wage Rs. 285/- P.M. b) Increase in House Rent Allowance Rs. 75/- PM c) Increase in Conveyance Allowance Rs. 300/- P.M. d) Increase in Education Allowance Rs. 30/- PM e) Increase in Leave Travel Allowance Rs. 150/- PM f) Increase in Washing Allowance Rs. 25/- PM g) Increase in Dust Allowance Rs. 25/- PM
Total Rs. 890/- PM
(2)(a) The fixed Dearness Allowance payable from 1.4.1996 at All India Consumer Price Index Number 1500 ( 1960 = 100) would be Rs. 2204. JO, which includes earlier fixed D.A. Of Rs. 824.30 and variable D.A. For 690 points (1500-810 points) at Rs. 2.00 per point i.e. Rs. 1380.00
(b) From 1.4.1996 for every point rise or fall in All India Consumer Price Index Number above 1500 (1960 = 100) the existing rate of variable Dearness Allowance of Rs. 2.00 per point shall be revised to Rs. 2.05 per point. The rate of variable Dearness Allowance of Rs. 2.05 per point will be further revised to Rs. 2.10 per point rise or fall 1.4.1998.
(c) The existing method of calculation of Dearness Allowance on quarterly basis would continue.
(3)(a) The Annual Increments in the respective scales of pay will be revised as follows with effect from 1.4.1996:
Grades Present quantum Revised quantum of increment of increments
E. Rs. 8.00 Rs. 24.00
D. Rs. 11.00 Rs. 33.00
C Rs. 15.00 Rs. 45.00
B Rs. 20.00 Rs. 60.00
A. Rs. 26.00 Rs. 78.00
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TC Rs. 13.00 Rs. 39.00
I Rs. 16.00 Rs. 48.00
II Rs. 20.00 Rs. 60.00
III Rs. 22.00 Rs. 66.00
IV Rs. 28.00 Rs. 84.00
V Rs. 32.00 Rs. 96.00
VI Rs. 36.00 Rs. 108.00
VII Rs. 40.00 Rs. 120.00
(b) The revised annual increment would be given on the next due date of increment of each workmen.
(4) Such of the workmen who were on the rolls of Cement Companies as on 1.4.1996 and who had completed continuous service of five years and above shall be given one additional graded increment on 1.4.1996 in their revised pay scale as service weightage. Such of the workmen who had completed fifteen years and above continuous service as on 1.4.1996 shall be given two additional graded increment in their revised pay scales as service weightage.
(5) The earlier settlement benefit of Rs. 115.00 will be treated as basic wage and termed as special pay in stages as detailed below:
Special Pay Settlement benefit
On 1.4.1996 Rs. 15.00 Rs. 100.00 On 1.4.1997 Rs. 55.00 Rs. 60.00 On 1.4.1998 Rs. 85.00 Rs. 30.00 On 1.4.1999 Rs. 115.00 Nil
As and when a portion of settlement benefit is treated as special paw the existing settlement benefit will be reduced by such amount.
(6) The settlement is valid for a period of 4 years from 1.4.1996.
(7) All categories of workers who have been covered by the Second Arbitration Award shall continue.
(8) All the existing service conditions, benefits and privileges shall continue to be operative till revised.
(9) If any workman reaches the ceiling of his grade during the pendency of this Settlement, he will continue to draw his annual increment at the rate last drawn.
(10) The salary for the month of February 1997 shall be computed and paid to the workers oh the above basis. Arrears for the period 1.4.19% to 31.1.1997 shall be paid separately as spelled out in para (B) above and as already discussed with the representative of workmen.
(P.L. Loi)
Managing Director
Dated March 2, 1997.
42. The court finds that the objection of the workmen, for implementation of the wage board award, accepted vide office Memorandum dated 12.3.1997 after settlement with the workmen due to workmen, is valid. The settlement was in fact implemented and that the workmen had started receiving their salaries in terms of the settlement w.e.f. 1.2.1997 paid to them upto July 1998. The OL has considered the increase of wages with the implementation of the wage board award. The OL however, has not accepted the increments and the increased dearness allowance to be calculated and paid on quarterly basis. The OL committed an error in refusing to accept the settlement notified by Office Memorandum dated 12.3.1997. The OL will admit the Increments, Special Pay, Settlement Benefits, and the quarterly increased in Dearness Allowances payable to the workmen from July 1998 to the date of winding up i.e. 8.12.1999.
b) Arrears due to workmen on account of Awards of Labour Court/Industrial Tribunal and other Industrial Adjudication Boards.
43. The OL has taken into consideration all the awards of the Labour Court and Industrial Tribunals, which were placed before him along with claims of the workmen. He has taken into consideration the awards, the implementation which was stayed by the High Court. Shri Ashok Mehta, learned Counsel for Official Liquidator submits that following Awards of the Labour Court and Industrial Tribunal were not considered by the OL as the details of these Awards and the calculations of the amount was not produced and annexed with the claims. These details are as follows:
1. Award by Industrial Tribunal, Allahabad delivered by Shri H.N. Misra in Adjudication Case No. 19 of 1984 dated 27.3.1985. This award covers 24 workmen terminated on 23.6.1980. Their termination was set aside with 75% back wages. In writ petition No. 12767 of 1985 by interim order dated 17.9.1985, this Court stayed the back wages and directed that the workmen be reinstated. The writ petition was dismissed by this Hon'ble Court on 25.5.2001. Shri Mehta submits that a computation of the award under Section 6H(1) of the U.P. Industrial Disputes Act 1947 was made on 9.8.1985 for five workmen for Rs. 211470/-. The other 19 workmen did not get apportioned. One of the workman covered under this Award is C-920 (Dalla) Shri Din Dayal.
2. Award by Labour Court, Allahabad by Shri H.N. Srivastava in Adjudication Case No. 8 of 1981 dated 9.7.1983 published on 4.8.1983. This award covers Shri India Deo Singh, Assistant Store Keeper, a workmen terminated on 23.6.1980. The Labour Court directed reinstatement with full back wages. In writ petition No. 13861 of 1983 by interim order dated 10.10.1985 the back wages were stayed. The writ petition was dismissed by this Hon'ble Court on 30.8.1981. In 1 this case the workman is entitled to back wages i.e. full wages from 23.6.1980 to 4.8.1983 and half wages from 4.8.1983 till the date of reinstatement. In the interim order only half wages were stayed from 4.8.1983 to the date of reinstatement.
3. Award by Labour Court, Allahabad by Shri Hari Mohan Misra in Adjudication Case No. 9 of 1984 dated 22.1.1985. In this award 122 workmen had claimed that they be made permanent w.e.f. 22.1.1985. Writ Petition No. 9708 of 1985 filed against the award was dismissed on 11.1.1989. By Special Leave Petition No. 8128 of 1989 against the judgment of High Court was dismissed on 7.3.1991. There is a calculation under Section 6H(1) of the U.P. Industrial Disputes Act 1947 in respect of this; award dated 30.3.1991 for Rs. 3104149.78 to which these 122 workmen are entitled.
4. Award in Adjudication Case No. 26 of 1988 by Industrial Tribunal. Allahabad presided over by Hon'ble Mr. Justice B.P. Mathur dated 3 1.11.1990. This award covers 19 workmen for payment of higher grade of Rs. 110-270 w.e.f. 16.3.1978. The claim was allowed and writ petition No. 594 of 1992 against this award was dismissed on merit on 9.4.1998. Out of 19 workmen covered under the award only 16 have applied. The OL has allowed claims of some of these workmen beginning from C-26891. It has observed that the claim of Hirawati wife of Lambodhar Prasad (C-1668) cannot be entertained as he died on 16.8.1989. She has not filed the appeal against the order and is otherwise not entitled to any amount. The rest of the 15 workmen, who have applied for enforcement of the award, are entitled to the amount, according to the calculation made by them.
5. Award in Adjudication Case No. 119 of 1986 by Industrial Tribunal presided over by Justice B.P. Mathur dated 5.1.1991 awarding claim of 404 workmen to be treated as permanent when they completed three years of service. A writ petition No. 30260 of 1991 was filed against the award in which the stay order was granted on 6.8.1996. The writ petition was dismissed on 24.9.2004. Recall application dated 29.7.2005 filed by the OL is still pending.
6. Out of these 404 workmen, 23 have left and 05 did not make any claim leaving 376 workmen. They are entitled to the award subject to calculation to be made as to when they are entitled to be made permanent on completing three years of service.
44. One Shri Munna Prasad, casual labour, Dalla Cement Factory, Dalla has filed an objection to the part rejection of his claim as workmen on the ground that there was an agreement between the management of the company (in liquidation) and 587 workmen, who were employed between 1971-1973 as casual labours (unit) and in 1981 as casual labours KCCP (Kajrahat Chunar Cement Project). A seniority list was issued in.19881 (Annexure No. 1 to the objection/appeal) and that all of them were working. In 1991 there was a Labour Court's award with regard to casual workmen and accordingly an agreement was entered into between the management and the workmen on 16/20.7.1992 (Annexure No. 2 to the objection/appeal) in which workmen were divided into two groups, in the first group, 122 workmen were kept, out of 02 had died and 02 had retired and remaining were kept in the second category. The management agreed that the second category will also be regularised in accordance with the orders of the then Managing Director dated 7.11.1978. According to this policy, if 30% of the 118 workmen were to be regularised, 70% of 275 workmen in category two were to be regularised simultaneously. Shri Harendra Pandey appearing for Munna Prasad submits that this agreement was withheld and that all 122 casual labour of first category were treated regular. The OL should have considered the fact that under the agreement 70% casual labours of the second group were also entitled to be regularised for which an objection was filed with the OL on 25,11.2006.
45. The workers covered under the award will be benefited in terms of this award by the Industrial Tribunal and Labour Court. The agreements can be accepted only if they are registered under Section 6B of the U.P. Industrial Disputes Act 1947. The agreement dated 16/20.7.1992 was not'a1 registered agreement. The settlement was not arrived in conciliation' proceedings and has not received the approval of the Deputy Labour Commissioner. The Court, as such, cannot recognise this settlement and thus no further relief except the award of the claim with further benefit given in the court in which order can be given to Shri Munna Prasad and similarly situate casual workmen.
46. The Court has gone through all the Awards of Industrial Adjudicatory Bodies and find that they were required to be implemented and the wages of the workmen covered by the Award were requires to be included in admitting their claims. The OL is directed to implement these Awards and to include the amount of the claims of the workmen who were beneficiaries of these industrial adjudication.
47. The OL has admitted almost all the arrears/demands of which were submitted by the workmen. There are no other arrears to be admitted. It was submitted by Shri P.N. Saxena that the workmen were also entitled to amenities allowances like dhoolbhatta over the uniforms, shoes and raincoat and helmet implemented w.e.f. 5.5.1997. The court finds that the production in all the plants had come to an end before 5.5.1997. There was no mining activity or production carried out after that date. The amenities allowances were admitted to the workmen in case they were actually found working. Since the workmen were not working, these benefits cannot be treated to be workmen's dues for the services rendered to the company (in liquidation).
Issue No. 6 & 7 : Whether, workmen are entitled to retrenchment Compensation under Section 25FFF of the Industrial Disputes Act 1947 calculated @ 15 days salary for every completed year of service and one month's notice pay treating them to be retrenched under Section 25F of the Industrial Disputes Act 1947 and whether the workmen are entitled to one month's notice pay treating them to be retrenched under Section 25F of the Industrial Disputes Act 1956?
48. A total number of 5919 workmen submitted their claims to the OL. Out of these, the OL, on the recommendation of the SCC, admitted 5229 claims and rejected 393 claims for want of proofs. The total amount claimed by the workmen towards the dues is Rs. 342,01,73,620/-. Out of this, the OL has admitted only Rs. 117, 18, 99,001/-. There are 16 categories of workmen including muster roll employees; casual employees; visiting teachers and 143 officers. The OL has considered and calculated salaries by approximating the gross salary of each category of workmen with the highest claim in the category as the indicator. The workmen were treated as overriding, preferential creditors under Section 529A of Companies Act 1956. The observation of the SCC accepted by the OL with regard to workmen is quoted as below:
WORKMEN : (Annexure 1a, 1b, 1c, 1d, 1e, 1f, 1g)
While adjudicating the claims of Workmen in the above named company under liquidation, the claims committee has gone through the records as were made available by the Official Liquidator. However, most of the records made available do not pertain to the period under consideration.
Payrolls of the workers do not appear to be accurate and authentic as the same are not signed or counter signed by any of the competent authority. The Committee also requested the employees provident Fund commissioner, Varanasi to submit the audit report and form VI (in which details of Workmen Salary and deductions are given), but the same has not been made available to the committee as yet.
We have examined the affidavit and supporting documentary evidence filed by the claimants and also taken into consideration available records, pay rolls and particularly the manpower report (indicating the grade-wise and designation wise gross salary), filed in Writ Petition No. 15134 of 1998, by Shri Harendra Pandey, the representative of one of the Workers Union before the Hon'ble Court. (Annexure : 1a) It is admitted; in the affidavit of majority of employees that they have been paid salary upto 12^th July, 1998.
Keeping in view the Supreme Court judgment sin S.K. Maini V Carona Sahu Co. Ltd. AIR 1994 SC 1824 and also in Burma Shell Oil Storage & Dist. Co. of India Management Staff' Association AIR 1971 SC 922, we have classified employees and workmen accordingly.
After careful scrutiny of the records and proofs, we have admitted workmen unpaid salaries till the date of winding up order. The workmen have also been allowed leave encashment, three months salary as retrenchment compensation as per Section 25FFF of the Industrial Dispute Act 1947 and Gratuity. Many of the workers have claimed bonus for the year 1993-94. In order to maintain uniformity, the committee has decided to grant Rs. 2,499.00 as bonus to all the workmen. Simple Interest @ $% per annum has been awarded on the net wages of the workmen from the date of winding up order till the last date of submission of claim i.e., 31^th July 2006. (Annexure No. 1b, 1c, 1d)
Note : Last salary drawn and service period has been mentioned on the affidavits of every workmen. Remarks like retired or died have also been mentioned on the affidavits. Complete calculation has Been done on computer and the print out of each calculation sheets containing 25 claims of workmen have been affixed on each bundle of claims file.
Some of the workmen have committed calculation mistakes. While some other workmen have claimed interest without mentioning the amount thereof, and therefore interest amount has not been included in the claimed amount. Some workmen have not specifically claimed retrenchment compensation, but as a policy decision we have allowed interest and retrenchment compensation to all the workmen. In such cases, admitted dividend may appear higher than the amount claimed. The benefit of retrenchment compensation has not been given to those who died or retired before the date of winding up order.
The statutory retirement benefits to the retired employees have also been allowed. We have also adjudicated the claims of workmen who have filed their claims on the basis of the orders passed by the Hon'ble Supreme Court, Hon'ble High Court, other Courts. Industrial Tribunal and Arbitrators. The claims found improper or doubtful have been rejected. (Annexure No. 1e, 1f 1g)
49. The workmen have been allowed unpaid salaries with classification of pay scales till the date of winding up i.e. 8.12.1999. The workmen have also been allowed leave encashment; three months salary as retrenchment compensation under the proviso to Section 25FFF of the Industrial Disputes Act, 1947 and gratuity. In order to maintain uniformity, the OL has granted Rs. 2499/- as bonus to all the workmen and then allowed simple interest @ 4% per annum under Rule 156 of the Companies (Court) Rules 1959 on the net wages from the date of winding up to till the last date of submission of claims i.e. 31.7.2006. The retired workmen were not treated as workmen on the date of winding up as they were not in employment. The statutory retirement benefits, however, have been allowed to the retired workmen.
50. Shri B.D. Mandhyan, Senior Advocate; Shri P.N. Saxena, Senior Advocate and Shri Ravi Kant, Senior Advocate submit that the workmen are entitled to retrenchment compensation. According to Section 25F read with Section 25FFF of Industrial Disputes Act 1947 which enables them to get one month's salary for the notice period and 15 days salary for each completed period of service. They have relied upon S. Anthony Raj v. A. Sanguman 1994 Com Cases (80) 531 in support of their submissions that compulsory winding up of a company on the ground that very substrjatum of the company was gone, will be covered under Section 25F read with Section 25FFF of the Industrial Disputes Act 1947. Such a case could not be covered by the proviso to Section 25FFF. The compulsory winding up on1 the recommendation of Board of Industrial and Financial Reconstruction under Section 20 of the Sick Industrial Companies (Special Provision) Act 1985 is not closure on account of unavoidable circumstances beyond the control of the employer.
51. In A. Sanguman Pilot Pen (India) Ltd. the winding up order was passed by Madras High Court on 27.10.1978 under Section 433 of the Companies Act 1956 after recording finding that the company was unable to pay its dues. The Madras High Court noticed the judgments of Kerela High Court and Bombay High Court and the interpretation of the definition of retrenchment by Supreme Court. In Madhav Chandra v. Nalini Manna (1963) 67 Cal WN 1037 the Kerela High Court held : "if the closure is held4 ay a consequence of the winding up and the employees are removed for that reason, they are not entitled to the benefit under Clause (i) of Section 25FFF which are governed by the proviso thereof." The Kerela High Court in Palai Central Bank Employees Union v. Official Liquidator (1965) 35 Com. Cases 279 held that closure as a consequence of notice under Section 445(3) of the Companies Act is one for unavoidable circumstances.
52. The Bombay High Court took a contrary view in Shri Madhav Mills in Re and held that the explanation to the proviso must be read in the context that the employer has to prove that the circumstances mentioned in the explanation to the proviso only refers to particular contingency in which the legislature decide that a finding would have to be made that the closure was not due to unavoidable circumstances beyond t lie control of the employer. The financial difficulties resulting out of usual trading activities are not unavoidable circumstances beyond the control of the employer.
53. In Hari Prasad v. A.O. Devakar AIR 1957 SC 121 and Hathi Singh Mafg. Co. Ltd. v. Union of India ; the Supreme Court held that the word 'retrenchment' in Section 25F of the Act means discharge of surplus labour or staff by the employer for any reason whatsoever, otherwise than a punishment inflicted by way of a discharge action and does not include termination of services of all workmen oh a bonafide closure of the undertakings or change of ownership of the management. In A. Anthony Raj (supra) the Division Bench of Madras High Court held that in most cases the compulsory winding up by the Court is based upon the power of employers/owners of the company to discharge their debts in due course of their business and that such an event cannot be treated as unavoidable circumstances beyond the control of the company. The Madras High Court allowed retrenchment compensation under Section 25F of the Act.
54. A conspectus of the above decisions and a reading of Section 25FFF would show that only those cases where the management of the company had no control over the events which led to closure and which will also include winding up that proviso to Section 25FFF would apply. These cases may include situations where the business suffered closure on account of change of policy by the Government, act of God like earthquake, floods, unforeseen and unpreventable riots, terrorist activities or change of fiscal polices by the Government. In these cases the management would have no control over the events leading to closure. In the present case the UP State Cement Corporation Ltd. (in liquidation) suffered losses due to bad governance, questionable management practices, excessive labour, out dated machinery and failure to adopt the modern techniques of manufacturing cement. All these circumstances indicated by the Board of Industrial and Financial Reconstruction were the causes for recurring losses, coupled with the fact that the State Government inspite of several opportunities did not infuse funds, led to situation in which the company was unable to survive and was consequently directed to be wound up. These events either singly or taken together are the circumstance which were not beyond the control of the management. The closure of industry on the winding up order passed in such an event will not fall in the proviso to Section 25FFF of the Industrial Disputes Act 1947. The workmen as such are entitled to full retrenchment compensation and pay for one month's notice in addition to the gratuity admitted by the Official Liquidator.
Issue No. 8 : Whether the workmen are entitled to interest @ 12% or interest not exceeding the rate of 4% on the wages from the winding up till the last date of submission of proofs and any other dues subsequent to thereof?
55. It is submitted that the worker's dues should bear the same interest rate as is paid on delayed pension. Learned Counsels, appearing for the workmen, have relied upon some judgments of Supreme Court in the matter of delayed pension. In these cases, it was observed that a pension is payable by operation of statutory service rules on the date of retirement. Any delay in payment of pension, which is no longer bounty or award, results into severe deprivation and hardships. The payment of pension is not dependent upon the mercy of employer.
56. In the present case, the sale of the assets was confirmed on 11.10.2006. The claims were invited before the confirmation of the sale. The workers and employees do not have a right to receive any interest on their dues payable under Section 529 and 529A and 530 of the Act until the sale was confirmed and thereafter the statutory period during which the claims are to be invited, rejections notified under Rule 163 of the Rules. Rule 156 of the Rules of 1959 provide for claim for interest after winding up. There is no interest either reserved or agreed to be paid on worker's dues, on the date of winding up order. Rule 146 provides an outer limit to which the creditors may prove for interest upto the date from the date sum was payable. The Rules provide that such interest shall not be exceeding to 4% per annum. Learned Counsels for workmen submit that since workmen's dues have priority over all other debts, they should be paid interest as there is sufficient amount left to be distributed. The Court cannot override the provisions of law, in adjusting equities. It is true that the workmen have not paid wages since July 1998 and that most of the workmen or their families were starving. The equity may however not cloud the discretion of the Court to be guided by the statutory provisions. In Anthony Rai (s) v. A. Sanmugam (1994) 80 CC 531, a Division Bench of Madras High Court did not agree with the view taken by learned Single Judge in awarding 12% interest to the workmen from the date of winding up.
57. The objections with regard to payment of interest @ 12% as such cannot be sustained. The OL has rightly admitted interest to the workmen @ 4% per annum on the dues to which they are entitled on the date of winding up of the company (in liquidation).
Issue No. 9. Whether the workmen are entitled to bonus in addition to the bonus of Rs. 2499/- awarded at flat rate for the year 1993-94?
58. The OL had admitted bonus at a flat rate of Rs. 2499/- in the year 1993-94, it is reported that all the workmen did not claim bonus and that the bonus at flat rate for the year 1993-94 was worked out and included in their claims on the basis of claim of some of the workmen. No one has-claimed more than this amount and for any subsequent year. Learned Counsel appearing for the workmen did not advance any argument on bonus. The workmen appeared to be satisfied that this one presumably on the ground that there was no mining activities and production in the unit after 1994 and that there were getting salaries upto July 198 on the grants given by the State Government. It may also be possible that workmen have received the bonus along with such grants at a statutory minimum rate. In any case since no argument was addressed, the court finds the award of bonus at a flat rate of Rs. 2499/- for the year 1993-94 justified with no further claim of bonus to be paid to the workmen as part of their wages.
Issue No. 10. Whether workmen dues are barred by limitation?
59. The workmen's dues are to be paid in preference to all other creditors except secured creditors for the purposes of payment of their dues. The workmen are ranked as secured creditors under Section 529 and 529A of the Act. In the present case, the workmen were paid upto 12.7.1998 from the grants given by the State Government. They have not received their wages since thereafter. The right to receive the wages accrued as soon as the assets were put to sale and sale proceeds were received by the OL. The workmen as such became entitled for payment of their dues on 13.11.2006. Their dues are as such not barred bv limitation.
60. All the objections/appeals of the workmen are consequently allowed to the extent that after correction of the mistakes those in their claims and those which have crept in on account of preparing the data, the Official Liquidator will admit to the workmen all the wage board arrears in term of paragraphs 39 to 46 of this judgment. The Official Liquidator will admit retrenchment compensation under Section 25FFF of the Industrial Disputes Act, 1947 calculated at 15 days salary for every completed years of service and one month's notice pay, leave encashment to the extent which was admissible under the Rules/Notifications/Orders of the Corporation (in liquidation) and 4% interest after the date of winding up till the declaration of final dividend by the Official Liquidator.
THE EMPLOYEES/OFFICIERS OF THE CORPORATION (IN LIQ)
61. These appeals by way of objections have been filed by eight officers of the company (in liquidation) represented by Shri Alok Yadav, Advocate. During the course of argument, Shri Alok Yadav made a statement that he does not want to press these objections except the objections of Shri Vinod Shanker Mehta (O-17) and Raman Bihari Saxena (O-14). He has filed supplementary affidavit stalling that in June 1997, their last pay was Rs. 11525/- and Rs. 10550/- respectively, whereas the OL has considered their salary at Rs. 10,000/- and Rs. 8700/- per month. However, during the further argument, Shri Alok Yadav did not press these appeals/objections.
SECURED CREDITORS
62. The company (in liquidation) was heavily indebted on the date it was wound up by the Court on 8.12.1999. It had taken loans by way of term loans from financial institutions namely DDBI Ltd; IFCI Ltd; LIC, working capital loans from State Bank of India, and terms loans from Allahabad Bank. The compan (in liquidation) had also taken terms loans from ICICI Ltd.
63. Shri V.B. Singh, Senior Advocate assisted by Shri Om Prakash Misra appears for IDBI and IFCI; Shri J. Nagar for LIC; Shri S.N. Verma, Senior Advocate assisted by Shri Joyant Banerji, for State Bank of India, and Shri V.K.S. Chaudhari Senior Advocate assisted by Shri P.N. Tripathi for Allahabad Bank. The loan of ICICI has been assigned to Kotak Mahindra Ltd. rep rented by Shri Om Prakash Misra.
64. The company (in liquidation) filed 'Statement of Affairs' on 6.3.2000 verified by Shri Yashpal Sharma, Company Secretary on Form No.57 on the" basis of audited balance sheets as on 31.3.1996. List 'B' annexed to the statement of affairs gives the assets specifically pledged and creditors wholly or partly secured. The estimated value of security of fixed assets mortgaged to FIs and Banks as on 6.3.2000 was disclosed at Rs. 31836.60 lacs and raw material, stores and spare parts hypothecated to bank for working capital loans were shown at Rs. 1205.50 lakhs (Total Rs. 33042.10 lacs). The principal amount borrowed from the banks and financial institutions, according to the loan agreements and the outstanding as on 6.3.2000, when the statement of affairs was filed, was disclosed at Rs. 25875.78 lacs.
65. In list 'B' of the 'Statement of Affairs' the company has declared securities and the amounts of debentures as follows: ________________________________________________________________________________ ________
Particulars Date Estimated No. Name of Creditor Addres Amount Debt when Su rplus
of assets when value of s and of debt contracted from
specifically secur security occupat se curity
pledged ity ion given
________________________________________________________________________________ _______
i)Fixed
assets Term Loans mortgage to 31836.60 i)IDBI 2974.70 from financial ii)IFCI 344.20 Institution s
institutions iii)LIC 630.00 and & Banks iv)SBI 500.00 Banks are (Details as v.Intt.Accruded secured by a
per and due on the 20461.88 charge over annexure-1 loan immovable vi) Outstanding properties
present and
future by w
ay
ii) Raw working capital 465.00 of joint material 1205.50 loan of SBi/Alld Equitable store & Bank mortagage b y
spares parts deposit of hypothecated Title deed and
to bank for Hypothecati on
working of all mova ible
capital loan and other (Details as assets pres ent
per and (future annexure-2) except book debts). The
mortage and
charge crea
ted
rank paripa
ssu
and are sub
ject
to prior ch
arge
created/to
be
created in
favour of
company ban
ker
in respect
of
stores and
spares
and stock i
n trade
and book be
bts for
borrowing f
or
working cap
ital
33042.10 25875.78
7166.32
66. All the secured creditors, including IDBI; IFCI; LIC; Kotak Mahindra Bank Limited (for ICICI Debentures); SBI and Allahabad Bank, have submitted claims which were verified by the OL. The observations of SCC dated 2.12.2006 accepted by the OL for verifying and admitting the claims of the secured creditors to prove are; given as below:
3. SECURED CREDITORS (Annexure No: 3)
The committee has verified the claims of following secured creditors as per the documents and affidavits made available.
i. IDBI
ii. LIC
iii. IFCI
iv. State Bank of India (Inch Working capital loan)
v. Allahabad Bank (Incl. Working capital loan)
vi. Kotdk Mahindra Bank Ltd. (ICICI : I & II Loan)
After perusal of affidavits and documents it was found that only State Bank of India has filed their Statement of Accounts from April 1980 to December 1987 and the company has serviced the interest part on the term loan upto 31^St December 1987.
Allahabad Bank has filled the statement from 1992 onwerds. The State Bank of India is the lead Bank of the consortium. On perusal of the documents and statement of accounts it has been assumed that the term debts of all the above mentioned Financial Institutions and Banks were serviced by the Company upto 31.12.1987. Principal Debts of the Company has been taken as per list 'B' annexed with the statement of affairs submitted by the Company with the Official Liquidator. We have calculated the interest part on following pattern.
1. From 1.1.1988 to, 8.12.1999 (Date of winding up order), Simple Interest @ 11% per annum has been granted. This is in consonance with the rate of interest as per the agreement on term loan advanced by IDBI. It is relevant to mention that the present prime lending rate of the State Bank of India is 11% per annum.
2. From 09.12.1999 to 31s' July 2006 i.e., last date of filling Claim (31^st July 2006), simple interest @ 4% per annum has been granted as per the Company Court Rule No. 156.
67. Shri Ashok Mehta, learned Counsel for OL, has made a preliminary objections to the maintainability of the claims of the secured creditors on, the ground that all the claims of the secured creditors are barred by limitation. The company (in liquidation) defaulted in payment of interest due and instalment of principal loans since 1986-87. The secured creditors did not file any confirmation of balances. They submitted copy of the letters calling back loans but did not file suit against the company (in liquidation) for decree within due time. Shri Ashok Mehta further submits that the secured creditors cannot claim to be overriding preferential creditors under Section 529A of the Companies Act 1956 as assets specifically mortgaged are not registered as charges under Section 125 of Companies Act 1956 and in any, case the overriding preferential claims of the secured creditors will only be, to J tin extent of value of the assets specifically pledged.
68. Shri Ashok Mehta submits; that date of filing of suit by IDBI in DRT (Original Application1 No. 265/1999) was not given. The IFCI also did not give the date of filing pf suit in DRT (Transfer Application No. 45 of 2002). The LIC, State Bank; of India and Kotak Mahindra Ltd. (ICICI) did not mention about any suit filed against the company. The Allahabad Bank also did not give the date of filing of suit in DRT (Transfer Application No. 149 of 1999). So far objections filed by State Bank of India and Allahabad Bank for working capital loans, the OL recommended that if there is any surplus amount after meeting the claims of first charge holder and workers overriding preferential claimants under Section 529A, their claims may be considered.
69. Regarding payment of interest, Shri Mehta called in aid Rule 156 of the Company (Court) Rules 1959. Since no demand in writing was made available by the secured creditors from the company, the secured creditors, according to the OL, are liable to be paid only 4% interest from the date of winding up.
70. Shri V.B. Singh, Senior Advocate appearing for IDBI and IFCI submits that Section 22(5) of Sick Industrial Companies (Special Provisions) Act 1985 excludes the period of limitation for the period the stay under Section 22(1) is operative. In the present case, the accumulated losses of the company were more than its assets and that the company lost its net worth in the audited balance sheet for the year ending 31.3.1991. A reference was made by the company under Section 15(1) of the Act of 1985 on 28.3.1992, which declared the company as sick industrial undertaking under Section 3O of the Act, on 7.10.1992. By an order dated 2.7.1997, the BIFR formed an opinion under Section 20 of the Act of 1985 to wind up the company and referred the matter to the Court which ultimately wound up the company on 8.12.1999 after the appeal was dismissed by AAIFR and the writ petition filed by workmen against the order of AAIFR was dismissed. Shri V.B. Singh submits that the period of limitation was arrested on 28.3.1992 and will re-start from 2.7.1997.
71. Shri V.B. Singh, Senior Advocate and Shri Om Prakash Misra submit that the company (in liquidation) has admitted the dues in the audited balance sheet as on 31,3.1996 and that the same admission is reflected in the 'Statement of Affairs' filed by the Company Secretary of the Company (in, liquidation) filed on 6.3.2000. In the meantime the IDBI, IFCI and ICICI filed claim petitions in Debt Recovery Tribunal, which was the only remedy available to the secured creditors to realize their dues. The date chart with regard to dues of IDBI, IFCI and ICICI (now represented by Kotak Mahindra Bank Limited) with regard to their dues for the purpose of working out whether the debts are barred by limitation is given as below:
1. Industrial Development Bank of India Limited (IDBI Ltd.)
1. 27.2.1978, 1st Loan Agreement executed between IDBI Ltd. and the company. In pursuance thereof Rs. 2300 Lacs (Rupee Term Loan) was fully disbursed to be paid @ 11% per annum payable half early on 20^th June and 20^th December each year. In the event of default a further interest @ 0.5% per annum by way of liquidated damages over and above the rate of interest was payable upon the, footing of compound-interest. The first charge on the movables and immovable assets of the company (in liquidation) was created ranking pari passu with other secured creditors.
2. 22.12.1980, 2nd Loan Agreement was executed. In pursuance thereof Rs. 700 Lacs (Rupee Term Loan) was fully disbursed. The company (in liquidation) was to pay interest at the rate of 11.85% per annum payable half yearly on 20^th June and 20^th December each year. In the event of default a further interest @ 2% per annum was payable by way of liquidated damages over and above the footing of compound interest. First charge on the movable and immovable of the company (in liquidation) was created ranking pari passu with other secured creditors.
3. 10.1.1983, the third Term Loan Agreement of Rs. 100 Lacs was executed and this third loan was fully disbursed to be paid @ 14% per annual payable half yearly on 20th June and 20^thDecember each year. In the event default a further interest of @ 2% per annum was payable by way of liquidated damages over and above the footing of compound interest. First charge on the movable and immovable of the company (in liquidation) was created ranking pari passu with other secured creditors.
4. 8.12.1999 the company was wound up by the High Court.
5.16.4.2002 the Debt Recovery Tribunal (DRT) Mumbai by order dated 16.4.2002 decreed the claim of IDBI in Original Application No. 265/1999 for an amount of Rs. 1, 29, 58, 09, 262/- together with pendelite and future interest and other damages till its realisation.
6. IDBI submitted details of claims by affidavit of proofs of debts amounting Rs. 1, 63, 38, 10, 436/- as on 8.12.1999 (the date of winding up order) and further interest upto 30.4.2006 amount Rs. 3, 41, 82, 87, 199/-.
7. The OL has admitted an amount of Rs. 7667.29 Lacs only.
II IFCI
1. 21.12.1980, 1^st Term Loan Agreement executed and Rs. 300 Lacs (First Rupee Term Loan) was fully disbursed payable with interest @ 11.85% payable half yearly on 20^th March and 20^th September each year. In the event of default 1 further interest of @2% per annum was payable by way of liquidated damages over and above the footing of compound interest. First charge on the movable and immovable of the Company (in liquidation) was created ranking pari passu with other secured creditors.
2. 22.12.1980 2nd Term Loan Agreement executed for Rs. 100 lacs was fully disbursed1 payable with interest @ 11.85% per annum payable on 20^th March and 20^th September each year. In the event of default a further interest of @ 2% per annum was payable by way of liquidated damages over and above the footing of compound interest. First charge on the movable and immovable of the company (in liquidation) was created ranking pari passu with other secured creditors.
3. 10.1.1983 the 3^rd Term Loan Agreement executed and Rs. 24 Lacs (3rd Rupee Term Loan) was fully disbursed. The interest to be paid @ 14% payable half yearly on 20^th March and 20^th September each year. In the event of default a further interest of @ 2% per annum was payable by way of liquidated damages over and above the footing of compound interest. First charge on the movable and immovable of the company (in liquidation) was created ranking pan passu with other secured creditors.
4. 5.6.2003, the Debt Recovery Tribunal, Lucknow vide order dated 5.6.2003 decreed the claim of the IFCI in Transfer Application No. 45 of 2002 for m amount of Rs. 25,48,21,578/- together with pendelite and future interest till its realisation.
5. IFCI submitted details of claims with affidavit of proofs of debts amount of Rs. 26, 45, 21, 731/- as on 8.12.19199 (the date of windng up order) with further interest upto 30.4.2006 amounting Rs. 70,14,49,794/-.
6. 15.12.2006 the OL admitted an amount of Rs. 887.18 Lacs.
III) Kotak Mahindra Bank Ltd. (assignee of the loans of ICICI Ltd)
1. 18.11.1980 1st Facility Agreement executed between ICI& Bank Ltd. and the Company (in liquidation). In pursuance thereof Rs. 400 Lacs was fully disbursed. The interest @ 12 % per annum was payable half! yearly on 1st January and 1st July each year, In the v. event of default, a further interest of @ 1% per annum by way of liquidated damages over and above the rate of interest was payable upon the footing of compound interest. The first charge was created ranking pari passu with IDBI Ltd, LIC, IFCI Ltd. and SBI (Term Loan of Rs. 500 Lacs) Loan of Rs. 500 Lacs) and SBI as a trustee for the Debentures of Rs. 400 Lacs held by ICICI Bank Ltd. The GUP furnished irrevocable and unconditional guarantees for payment of loan.
2. 7.10.1981, 2^nd Facility Agreement was executed for grant of financial assistant of Rs. 100 Lacs disbursed by way of subscribing debentures carrying an interest @ 12% redeemable during May 15, 1982 to November 15, 1987. Against this disbursement the outstanding amount was Rs. 75.10 lacs. A first charge on the movable and immovable assets of the Company (in liquidation) was created ranking pari passu with IDBI Ltd, LIC, IFCI Ltd, SBI (Term Loan of Rs. 500 lacs) and Allahabad Bank (Term Loan of Rs. 500 Lacs) and SBI as a trustee for the debentures of Rs. 400 Lacs held by ICICI Bank Limited. The GUP furnished irrevocable and unconditional guarantees for payment of the loan.
3. 6.12.2006 the Debt Recovery Tribunal, Allahabad vide order dated 6.12.2006 in Original Application No. 291 of 2001 between ICICI Bank Ltd. v. UP State Cement Corporation Ltd. decreed the claim and held that Kotak Mahindra Bank Ltd. is entitled for recovery of an amount of Rs. 56,41,37, 770/- together with pendelite and future interest @ 12 % per annum with half yearly interest.
4. 15.6.2006 Kotak Mahindra Bank Ltd. submitted demand of1 claims on affidavit of proofs amounting to Rs. 46,59,51,812.32 as on the date of winding up.
5. 15.12.2006 the OL admitted an amount of Rs. 1224.54 Lacs only.
72. Shri V.B. Singh submits that with regard to term loan, the contractual rate of interest will prevail over the interest provided under Rule 156 and that even after the winding up order the agreed rate of interest will continue. The OL has no right to fix any rate of interest and that Section 529A is fully attracted. The IDBI filed a claim before DRT Mumbai, which has issued a recovery certificate of Rs. 1,29,58,09,262.00 with pendentilite and future interest till the date of its realization on 18.4.2006. According to Shri V.B. Singh, the company (in liquidation) is indebted to IDBI for Rs. 3,41,82,87,199.00 with agreed interest upto 30.4.2006 and submitted the claim with complete details against three term loans with relevant supporting documents in proof of debts in Form-66 to the OL. He submits that the notice of the OL. accepting the claims only for Rs. 7667.29 Lacs and rejecting the claim of Rs. 29615.58 lacs is illegal and against the provisions of the (sic).
73. There is no dispute with regard to the principal amount borrowed from the financial institutions and banks by way of terms loans, working capitals loans and debentures. In the objections filed by FIs and Banks, the Court is concerned with only two objections; firstly, the loan is barred by limitation as claimed by the workmen and secondly, if the loans are not barred by limitation, the rate of interest to which the financial institutions and banks are entitled upto date of winding up order and thereafter till the date of declaration of dividend. In case the answer to both the questions raised as above is in favour of the FIs and Banks, the third question regarding overriding preferential claims of the secured creditors to the extent of the securities specifically pledged, mortgage and hypothecated for the purposes of Section 529 and 529A will arise.
74. It is admitted that in proceedings before the DRT Mumbai and DRT Allahabad, the OL was represented by his counsel Shri Arnab Banerji. A written statement was filed by the OL. The decree as such granted by DRT is binding on OL. He has not challenged the decree in the appeal. The IDBI, IFCI and Kotak Mahindra Bank Ltd. have already put the decree in execution which are pending before the Recovery Officer, DRT. As a result of these proceedings, the OL cannot challenge that the claims of the IDBI, IFCI and Kotak Malvndra Bank Ltd. are barred by limitation. In fact the OL has not treated the claims to be barred by limitation and has adjudicated them. He has admitted the principal amount to proof. The OL, however, has reduced the interest at a simple rate of 11% per annum on the basis that it was the prime lending rate of the financial institutions and banks prevalent in the period fixed by RBI, and has admitted only 4% interest after the date of. winding up. Till the date the claims were invited i.e. 31.7.2006.
75. The laws of insolvency are applicable for payment of secured debts. It is agreed and it is admitted to the counsels for the secured creditors including IDB1, IFCI, Kotak Mahindra Bank Ltd, LIC, SBI and Allahabad Bank that under the consortium agreement, the term loans granted by FIs and Banks are secured as first charge on the movable and immovable assets of the company (in liquidation) ranking pari passu with other secured creditors. This leaves only the working capital loans which were secured by hypothecation of raw materials, stores and spare parts. The estimated value of the security of the fixed assets, mortgaged to financial institutions and banks given as per Annexure No. 1 of the statement of affairs dated 6.3.2000 is Rs. 31836.60 lacs and the estimated value of raw materials, stores and spare parts hypothecated to the banks in working capital loans detailed as per Annexure No. 2 of the 'Statement of Affairs' dated 6.3.2000 is Rs. 1205.50 Lacs.
76. The entire assets of the company have been sold as is where is and whatever there is basis including actionable claims. These assets include fixed assets, stocks, and raw material, lease hold rights and reliefs and concessions which have been detailed in the order. The valuation of, the security of the secured creditors with regard to term loan has been given in the 'Statement of Affairs' as on 6.3.2000 which has not been disputed by any of the party or their counsel appearing in the matter. The amount of debts due to the banks and financial institutions both by way of term loans and working capital loans of Rs. 25875.78 lacs on 6.3.2000 was as such fully secured and represented by the estimated value of the security of Rs. 33042.10 Lacs, leaving a sum of Rs. 7166.3 lacs as surplus from security. This estimated debt will further bear the interest at the agreed rate with half yearly rest as agreed under the agreement and with a further penal interest in terms of the agreements. These have to be calculated upto the date of winding up i.e. 8.12.1998 and thereafter these amounts will bear a simple interest under Rules 156 and 179 only at 4 % per annum as nothing would be left as surplus after payment in full of all the claims of creditors admitted to proof is to be paid interest only at a rate not exceeding 4% per annum from the date of winding up order to the date of declaration of final dividend.
State Bank of India
77. Shri S.N. Verma, Senior Advocate assisted by Shri Jayont Banerji, Advocate have appeared in support of their Appeal No. O-22 under Rule 164 of Rules of 1959 supported by the affidavit of Shri Maheep Kumar, Assistant General Manager, SBI Stressed Assets Management Branch, Lucknow as supplemented by affidavit of Shri M.C. Panday, Manager-, SBI, Stressed Assets Management Branch, Lucknow that Form-69 dated 15.12.2006 received by the SBI enclosing reasons of the OL in partly rejecting the claim is erroneous as it does not include the other admitted amount of Rs. 301.27 lacs in respect of the cash credit limit and that the OL has illegally and arbitrarily, partly rejected the claim of the State Bank of India (SBI).
78. The SBI claimed Rs. 5544.94 lacs, out of which only an amount of Rs. 1288.75 lacs was admitted by OL towards term loan.
79. There is an obvious error in Form-69 dated 15.12.2006 inasmuch as the OL has admitted Rs. 1590.02 lacs which includes Rs. 1288.75 lacs towards term loan with interest and Rs. 301.27 lakhs towards working capital loan with interest.
80. Shri S.N. Verma, Senior Advocate states that SBI has no objection to the acceptance of the claim of Rs. 301.27 lacs towards working capital loan witli interest and is pressing his objection only with regard to interest of component of the term loan. It is submitted that the calculation of simple interest @ 11% from 1.1.1988 to 8.12.1999 (the date of winding up) ignores the contractual rate of interest.
81. In paragraphs 9 and 10 of the appeal it is stated that Term Loan Account No. 1 was served only upto 31.3.1985 and Term Loan Account No. 2 was served upto 30.0.1987. Thereafter the company was liable to pay the contracted rate of interest. Para 6(ii) of the consortium loan agreement deals with the rate of interest and liquidated damages on SBI loans. The clause reads as under:
The Company shall pay to SBI interest at SBI advance rate subject to a minimum rate of 12.5% per annum on the principal amount of the SBI loan advanced and outstanding from time to lime. Interest will be payable on the 31^st march, 29^th June, 30^th September and the 30^th December each year. In the event of default of regular payment of interest on the due date, compound interest at 13.5% per annum from the relative due date to the date of payment shall become payable on the monies due
82. Further para 9(i) of the consortium loan agreement prescribes the manner in which the payments received have to be appropriated. The paragraph reads as under:
Any payment made by the Company to the lenders under these presents shall be appropriated in the following order of priority:
(a) first towards the commitment charges due and payable:
(b) Secondly towards the other cheques, costs, expenses and other monies due and payable, if any under these presents:
(c) Thirdly towards penal interest or additional intent, due by way of liquidated damages;
(d) Fourthly towards interest and compound intent due and payable respectively; and
(e) Lastly towards installments of principal.
83. Shri S.N. Verm a has relied upon Central Bank of India v. Ravindra and Ors. in which the principal amount issue was considered by the Supreme Court and it was observed:
Subject 10 a binding stipulation contained in a voluntary contract between the parties and/or an established practice or usage interest on loans and advances may be charged on periodical rests and also capitalised on remaining unpaid. The principal sum actually advanced coupled with the interest on periodical rests so capitalized is capable of being adjudged as principal sum on the date of suit.
84. According to Shri S.N. Verma, Term Loan Nos. 1 and 2 with agreed account of interest was fully secured as first charge under the consortium agreement and that sufficient amount was available in the security available with the company disclosed in the 'statement of affairs'. The amount claimed by the State Bank of India was decreed on 6.12,2006 by Debt Recovery Tribunal, Allahabad in TA No. 1496 of 2000 in which the OL was also a party. The Slate Bank of India's shares in the consortium finance of Rs. 77 crores in the nature of term loan was Rs. 5 crores, between 17.8.1979 to 1.10.1980. The DRT decreed the claim of SBI and issued recover) certificate for Rs. 62, 08, 50, 394.53 together with pendelite and future interest @ 17.75% per annum (the award is annexed to the supplementary affidavit).
85. In para 19 of the memorandum of appeal the total amount due upto date of winding up towards both the term loans at contributed rate of interest @ 17.5% per annum is quantified at Rs. 5290.90 lacs. The bank has claimed simple interest @ 4% after the date of winding up if the amount is available after satisfying the secured creditors and workmen.
86. After reading Clause 6(ii) of the consortium loan agreement quoted in para 12 of the memorandum of appeal, Shri S.N. Verma very fairly stated that in the event of default of regular payment of interest, on due date the SBI could get the maximum interest @ 13.5 per annum compounded quarterly upto date of winding up and accordingly Shri Jayont Banerji in the presence of Shri M.C. Panday, Manager, SBI, Stressed Assets Management Branch, Lucknow submitted a fresh calculation of interest @ 13.50%. The total outstanding term loan as on 31.3.1993 was Rs. 16,37,39478/-. Adding compound interest the amount upto date of liquidation i.e. 8.12.1999 due on term loan 1 + 2 account comes to Rs. 39,80,875, 79.00 (Rupees Thirty Nine Crores Eighty Lacs Eighty Seven Thousand Five Hundred Seventy Nine only). The SBI pressed its claim for this amount and if anything is left in liquidation, a further simple interest @ 4% to be added till the declaration of final dividend.
87. The other submission of Shri. S.N. Verma regarding liquidation expenses has been dealt with while considering the claims of the UP Power Corporation. In substance he submitted that any amount other than the amount spent for preservation pf assets-, referred to in Sections 556, 557, and proviso to Section 529(2) of the Act read with Rule 338 of the Rules of 1959 cannot affect the security of the bank. The amount legally claimed by the UP Power Corporation for supply of the electricity under the orders of the Court was for the benefit of workmen and that workmen and the occupants of the properties enjoying electricity as goods must pay the amount either from their shares or from their pockets. Shri S.N. Verma has also relied upon proviso to Section 529(2) to apportion the liquidation expenses between the secured creditors and he workmen.
Allahabad Bank
88. Shri V.K.S. Chaudhari, Senior Advocate assisted by Shri P.N. Tripathi appearing for the Allahabad Bank have seriously disputed part rejection of their claim in the OL communication on Form 69 dated 15.12,2006 in which the OL has communicated that out of amount claim of Rs. 39747.05 lacs, the amount of only Rs. 1288.75 lacs is admitted.
89. Shri V.K.S. Chaudhari states that Allahabad Bank ha> no grievance and is not making any objection with regard to claim admitted towards working capital loan with interest of Rs. 368 lacs. The bank, however, has serious objection to the rejection of the claim and agreed interest under the consortium agreement on term loans as the Allahabad Bank has been worst sufferer.
90. Shi V.K.S. Chaudhari, learned Senior Advocate states that Allahabad Bank has all along maintained its stand that it wants to keep out of the winding up. The bank has not participated in the liquidation proceedings except by submitting proof of debts in response to the notice of the OL. Shri Chaudhari has relied upon ICICI Bank v. Sidco Leathers (2006) 5 CLJ 470 (para 53 and 54) in support of the submission that by submitting the affidavit of proofs the bank shall not been taken to have joined the winding up. He submits that bank has neither relinquished the security nor has given up the guarantee and offer to the extent the bank's claim is rejected. The outstanding will be secured by the guarantees given by the Government of Uttar Pradesh. He has referred to the observations made in the order dated 14.2.2002 rejecting the application of the State Government to accept the offer of M/s Grasim Industries Ltd. as well as ground No. 9 and 10 of the appeal and the observations made by the Division Bench in Special Appeal No. 346 of 2002. In para 6 (iii) of the consortium agreement quoted in para 19 it was agreed by the company (in liquidation) with the Allahabad Bank as follows:
(iii) The Company shall pay to AB interest at the AB advance rate subject to a minimum of 12.5% per annum on the principal amount of AB loan advanced, and] outstanding from time to time. Interest will be payable on the 31^st March, the 29^th June, the 30^th September and the 30^st December each year. In the event of default of regular payment of interest on the due dates compound interest at 1% per annum over the interest rate applicable for the time being from the relative due date to the date of payment shall become payable on the moneys due.
In the event of default in payment of an instalment of principal, the Company shall be liable to pay to AB by way of liquidated damages additional interest calculated at the rate of 1% per annum over the interest rate applicable for the time being on the instalment in default from the due date till it is paid. The payment of compound or additional interest shall not affect any liability of the Company hereunder for such default, nor will it affect the rights of AB to proceed against the Company for such default.
91. It is stated in paragraph 19 of the memorandum of appeal that at the time of disbursement of the loan in 1981 the MLR/PLR of the bank was 19.5% and the bank rate was 12%. While at the time of NPA of the account in March 1992, the rate of PLR/MLR was 18.5% while the interest of CC limit was agreed subject to minimum rate of 18% per annum quarterly rests.
92. The Clause (iii) of the Agreement dated 3.7.1984 of CC limit is not in issue as the bank is not questioning the amount of interest paid and the quantum of admitted on CC limit by the OL.
93. Shri V.K.S. Chaudhari submits that the term loan of Rs. 500 lacs was divided into two accounts namely TL-1 of Rs. 300 lacs had Rs. 570.14 lacs on 6.6.1989 and TL-2 of Rs. 200 lacs had 527.38 lacs on 6.6.1989. These amounts with interest on 8.12.1999 for Term Loan No. 1 at the agreed interest rate which comes Rs. 4986.51 lacs and for Term Loan No. 2 had Rs. 4757.18 lacs and thus on 8.12.1999 a total amount of Rs. 9743.69 lacs was due.
94. The Allahabad Bank was required to give an official statement of the bank rate at which the interest could be charged under the agreement. The bank rate and minimum lending rate and/or PLR of Allahabad Bank (except sick units of other private sectors where concessions are given) shows that the bank rate in 1989 was 10% and that it never exceeded 12% upto 1999. The Allahabad Bank as such was required to explain as to how it has charged an amount of more the AB advance rate.
95. There is a difference between consortium agreement with SBI in Clause 6(ii) and with Allahabad Bank in Clause 6(iii). Whereas in respect of SBI the compound interest is indicated at 13.5% per annum, in respect of Allahabad Bank, in the event of default in payment of principal, the company was liable to pay to Allahabad Bank by way of liquidated damages additional interest calculated @ 1% per annum and that the interest rate applicable for time being on the instalment. In the event of default of regular payment of interest, a compound interest @ 1% per annum over the interest rate applicable was payable from the due date without effecting the liability of; the company. In the supplementary affidavit of Shri I.D. Tiru, Senior Manager, Allahabad Bank, Churk Branch, Sonbhadra, U.P., it is stated that final calculation of the total outstanding of the term loan till 9.12.1999 given in paragraph b had reached to Rs. 58, 18, 64, 530.00 (Term Loan-I Rs. 29,03,85,380.00 and Term Loan II Rs. 29,14,79,150.00). This is the final calculation on the admitted rate of compound interest and penal interest without compounding.
One lime Settlement
96. Shri V.K.S. Chaudhari submits that the financial institutions had agreed to one time settlement. He has referred to the orders of the Court and the orders in Special Appeals It is submitted that once the financial institutions and banks had agreed to on, time settlement of their term loans. They cannot claim any amount higher than the amount offered from the sick industry.
97. The argument does not merit any consideration inasmuch as the one time settlement principally agreed by the financial institutions and bank was not finalised in the meetings. The financial institutions and banks had agreed towards request of the State Bank of India to one time settlement of their dues in view of the offered of M/s Grasim Industries Ltd. The State Government had persuaded the financial institutions and banks that there was no possibility of getting any amount higher than the amount Rs. 241 crores offered by M/s Grasim Industries Ltd. including workmen's dues and offer for voluntary retirement scheme to the workmen. The acceptance to the offer of one time settlement by the banks and financial institutions was under the shadow of persuasion by the State Government to sell the assets. The negotiations did not materialize as the Court rejected the offer of State Government to sell the assets to M/s Grasim Industries Ltd. and proceeded to advertise the sale through OL in accordance with the provisions in the Companies Act. All the financial institutions and Banks excluding Life Insurance Corporation filed their claims before the Debt Recovery Tribunal and that all these claims have been decreed. In the circumstances, there is no substance in the objections taken by the Allahabad Bank that the financial institutions and banks had agreed to one time settlement of their dues and that they should not be allowed to claim anything more the amount offered by them in the year 2001.
98. Shri V.K.S. Chaudhari submitted that the domestic supply of electricity dues to the porkers, cannot be included in the liquidation expenses to dilute the security of the bank. In the matter of payment of public dues under Section 529 and 529A to the secured creditors, only that much amount can be treated as liquidation expenses, which is necessary for preserving the assets of the company. The domestic supply of electricity was made to the workmen and thus they are liable to pay the electricity bills to the UP Power Corporation. There cannot be any element of discretion or orders to be passed, for protecting fundamental rights of the workers, who were required to vacate the residential accommodations as soon as the company was wound up. If the OL failed to discharge his liability of the evicting the workmen and to obtain vacant possession, the banks securities cannot be diluted. The law and order is a problem of the State Government and not of the OL or the, Court, to give any extra benefit out of the security charged for repayment of the dues of the banks. Shri Chaudhari has relied upon judgment in Wonders Tupiterchits 1992 (74) CC 215 (Kerela High Court) in support of his submission regarding liquidation expenses. He has further relied upon Indian Bank v. OL that the
court's decree has to be accepted by the OL irrespective of the renewal of charge under sec on 125 of the Companies Act; State Bank of India v. Wasangi Venketeshwar Rao (para 7 and 8) in support of his submission that the contract with a secured creditors cannot be varied and in which the contract of interest at the RBI rate subject to minimum of 13.50% was upheld by the Court.
Life Insurance Corporation
99. Shri J. Nagar, Advocate, appearing for Life Insurance Corporation (LIC), has filed an Appeal under Rule 164 of the Rules of 1959 (O-39) challenging the part rejection of the proof of debts submitted by LIC. As against Rs. 4996.30 lacs claimed by LIC, the OL admitted only Rs. 1623.83 Lacs treating the term loan to be inoperative from 1.1.1988 and adding 11% simple interest upto date of winding up and 4% simple interest thereafter till the date of filing their claim.
100. Adopting the arguments addressed by Shri V.B. Singh, Senior Advocate appealing for IDBI and IFCI; Shri Om Prakash Misra, Advocate for Kotak Mahindra Bank Ltd; Shri S.N. Verma, Senior Advocate for State Bank of India and Shri V.K.S. Chaudhari, Senior Advocate for Allahabad Bank, Shri J. Nagar submits that according to the judgment in ICICI Bank v. Sidco Leather Ltd. (2006) 5 CL.T 470 claim of LIC is entitled to the entire principle with the contracted rate of interest. He submits that the term loan granted by LIC under the consortium agreement was disbursed in three instalments vide pronote dated 8.12.1979; 29.1.1980 and 30.10.1980. The account became inoperative after 31.12.1987. The first term loan was for Rs. 5,10,00,000/- and the second term loan was for Rs. 90 lacs. The company (in liquidation) agreed to pay interest @ 12% per annum and further agreed that in case of default of principal amount, default of interest of 1% and in case of default of interest an additional penal interest of 1% will be payable. According to Shri J. Nagar, the interest @ 12% on the principal amount was payable on half yearly basis. The penal interest, however, will not be compounded in view of judgment in Central Bank of India v. Ravindra (2002) 1 SCC 368. In this judgment the Supreme Court held that a person, deprived of the use of money to which he is legally entitled, has a right to be compensated for the deprivation, which may be called as interest compensation or damages subject to a binding stipulation contained in a voluntary contract between the parties and/or and established practice or use of interest and loan and advance may be charged on periodical rests and also capitalized on remaining unpaid. Principal sum actually advanced coupled with the interest on periodical rests so capitalized as capable being adjudged) as principal sum on the date suit (para 58). The interest once capitalized ceases to be interest and becomes a part of principal sum or capital and therefore the question of awarding interest on interest does not arise a all. The Supreme Court further held in para 55 (1) that penal interest cannot Lie capitalized. It will be opposed to public policy. Further interest i.e. interest on interest whether simple, compound or penal cannot be claimed on the mount of penal interest.
101. On the law laid down in Central Bank of India's case (supra) and further on the act that there was no agreement or established practiced or use nor any such established practice of use has been pressed into service, the compounding of penal interest cannot be claimed by the financial institutions and banks.
102. The LIC did not file any suit for recovery of principal and interest in the Civil Court or in the Debt Recovery Tribunal. Shri J. Nagar submits that though loan w is inoperative from 1.1.1988 and that the reference made to BIFR was registered on 10.7.1992vand the winding up order was passed on 8.12.1999, the claim of LIC will not be barred by limitation as under Article 63 of the Limitation Act 1963 the limitation for filing a suit for foreclosure of mortgage is 30 years and thus the claim filed by LIC is within the limitation of the creation of mortgage in 1978-79. Shri J. Nagar submits that the entire due of the LIC were secured by mortgage of the fixed assets of the company under the consortium agreement and that these assets were much more the in the amount claimed by the LIC. The claim as such is not barred by limitation.
103. In the present case the entire debts of the banks and financial institutions were secured by simple English mortgage by deposit of title deals. In the Statement of Affairs' as prepared on the basis of the balance sheet as on 31.3.1996 filed on 613.2000 the total amount due to secured creditors with interest was disclosed to Rs. 25875.78 lacs and that the fixed assets mortgaged to financial institutions and banks were estimated to be valued at Rs. 31836.60 lacs. The loan was entirely covered by fixed assets mortgaged to he financial institutions and banks. Section 17 of the Recovery of Debts due o Banks and Financial Institutions Act 1993 provides for same, limitation as it is provided by limitation Act 1963 and thus the limitation for filing suit by the mortgagors for foreclosure under Article 63(a) is 30 years. The claims of LIC are as such not barred by law of limitation.
104. LIC had claimed an amount of Rs. 4996.30 lacs from the OL. This claim was based on 15% interest and also capitalizing it by compounding on half yearly basis. Along with his appeal, Shri J. Nagar has given a fresh calculation of both the terms loans calculated @ 12.50 % compounded on half rest yearly basis. On the first term loan of Rs. 5,40,00,000/- and second term loan of Rs. 90 lacs the interest has been calculated @ 15 % compounded on half yearly basis. The total dues of LIC calculated in the aforesaid manner upto date of winding up i.e. 8.12.1999 are Rs. 324,391,121/-. The LIC has agreed not to charge the penal interest.
105. The Appeals/Objections of the secured creditors including the, IDBI, IFCI, Kotak Mahindra Bank Ltd, SBI, LIC and Allahabad Bank are consequently partly allowed with directions to the OL to recalculate the amount as follows:
106. In ICCI Bank Ltd. v. Sidco Leathers Ltd. and Ors. (2006) 5 CLJ 470 the Supreme Court set, aside the order of High Court at Allahabad dated 4.8.2004 in Special Appeal No. 698/2002, affirmed the judgment of Single Judge (Company Judge) dated 24.5.2002. Sidco Leathers Ltd. was wound up on 16.12.1993 and the OL was appointed as Liquidator of the company. The IDBI, IFCI, ICICI had given Rupees Term Loans and Foreign Currency Loan to the company. The Punjab National Bank advanced working capital funds. A first charge was created in favour of ICICI Bank Ltd. along with other financial institutions by equitable mortgage with deposit of title deeds of the immovable properties. The Punjab National Bank secured its loan by second charge by way of constructive delivery of title deeds. The charge of Punjab National Hank was subservient to the charges in favour of IFCI, IDBI and ICICI. The ICICI filed a suit which was transferred to DRT Bombay. The High Court permitted the suit to continue under Section 446 of the Companies Act. The PNB also filed a suit in the court of Civil Judge, Fatehpur. The OL sold the assets and had a sum of Rs. 71,00,351/- available with him for distributions to the creditors of the company. Relying on Allahabad Bank v. Canara Bank and Anr. AIR 2000 SC 1535 the Company Judge held that IFCI and IDBI have joined the winding up proceedings and have submitted proofs of debts before the OL They shall be taken to have given up their securities and thus they will not claim any priority over the debt of PNB on the fixed assets. The Division Bench held in appeal that the appellant, haying opted to remain outside the liquidation, will have second claim of beneficial right. The right of secured creditors under Section 529A is a contingent right and that the ICICI Bank Ltd. was rank with unsecured creditors to' take its dividend under Section 529(2) of the Act.
107. The Supreme Court while setting aside the judgment held that corporate insolvency procedure serve a variety of functions which include collective execution by unsecured creditors, facilitation of corporate rescue and the enforcement of security which would also include corporate morality. The liquidation proceedings are collective enforcement mechanism for the benefit of unsecured creditors. The liquidation is also an action for termination of company affairs. Applying pari passu principles, creditors' claims are to be treated alike, a single point of time at which the assets are liable 10 be quantified must be pinpointed, but then subsequent events are also required to be considered. For those who desired to go before the Company Court for dividend by relinquishing their security, in accordance with the Insolvency Rules, Section 529 of the Companies Act will be attracted. Under Section 47 of the Provincial Insolvency Act, a secured creditors may realise his security and prove for balance due to him; after deducting the net amount realized. Where a secured creditor relinquishes his security for general benefit of the creditors, he may prove for ids whole debt. Sub-section (3) provides that where a secured creditor does not either realize; or relinquish his security, he shall before being entitled to have his debt entered in the Schedule, state in his proof the particulars of his security and the value at which he assesses it and shall be entitled to receive the dividend only in respect of the balance due to him after deducting the value so assessed. Sub-section (6) provides that where a secured creditor does not comply with the provisions of this section, he shall be excluded from all shares in any dividend. The second class of the secured creditors are those who come under Section 529A(1)(b) of the Companies Act, who opt to stand outside the winding up to realise their security. They also come, in certain circumstances, go before the Company Court. The Apex Court held that though Section 529A of the Companies Act contains a non-obstante clause but in construing the provisions thereof, it is necessary to determination the purport and object for which the same was enacted. Earlier the dues of the workmen were not to be treated pari passu with the secured creditors. It is only after insertion of Section 529A the workers' dues are pari passu with the secured creditors.
108. it was held by the Apex Court that secured creditors have a valuable righi which must be preserved. The Parliament had by amending the provisions of the Companies Act did not intend to take away respective rights of the secured creditors under Section 529(1)(c) of the Companies Act or vis-a-vis unsecured creditors. It does not envisage respective rights amongst the secured creditors. Section 48 of the Transfer of Property Act will not stand obliterated inter-se priority of secured creditors. It does not get obliterated by merely responding to public notice and that unsecured creditors are not to be placed at par with the secured creditors. The filing of affidavits or proofs of claims does not amount to relinquishing the security. In substance it was held that in submitting the affidavits or proofs of the claims with the OL, for distribution of the claims beyond realized assets, the inter-se contract with regard to the priority of charges between secured creditors has to be enforced by the OL. If the OL proceeds to sell the security the Court first has to pay the amount on which the security was valued to the secured creditors out of the sale proceeds.
109. A consortium agreement was entered into between IDBI; State Bank of India; and Allahabad Bank on 27.2.1978 with the U.P. State Cement Corporation Ltd. (in liquidation). Under this agreement annexed in the appeal filed on behalf of IDBI and also annexed as Annexure No. 3 to the appeal filed by the State Bank of India (O-22), the term loans were agreed, to be the first charge on the fixed assets of the company (in liquidation). Schedule-III of the agreement for security clause for equitable mortgage provided in para-1 that the loan amounts of the lender together with interest compound and/or additional and/or penal interest, liquidated damages, commitment charge, other charges, cost expenses and other monies payable shall be secured by way of equitable mortgage by deposit of title deeds on all the immovable properties of the company present and in future and by charge by way of hypothecation of the movable properties of the company present and in future. In the event of default in para-2 the lenders reserved a right to take over the management of the company and for this purpose in para-3 the company was required to execute undertaking for creating registered legal mortgage (s) in English form whenever called upon by the lenders, the company was also required to execute revocable power (s) of attorney authorizing the lenders to execute on behalf of company a registered moral mortgage (s) in English forms. The charge in para-4 all the lenders were put subject to charge created or to be created by the company in favour of its bankers on stocks of raw materials; semi-finished; finished goods; consumable stores and books debts for its working capital requirement. Para-5 provided that the charge in favour of lenders was to be first charge ranking pari passu for the term loan of Rs. 400 lacs of ICIC1; Rs. 700 lacs of LIC; Rs. 300-lacs of IFCI; Rs. 500 lacs of SBI and Rs. 500 lacs of Allahabad Bank. In schedule-5 the company and State Government agreed to furnish a joint undertakings to the IDBI that they shall procure for the company at the appropriate time on terms acceptable to lenders funds to meet shortfall in internal resources as estimated to be available for financing the proposed project and short fall in finishing overrun, if any, in the case of project.
110. The secured creditors namely Allahabad Bank, LIC and SBI have submitted fresh calculations of their dues taking into account the dates after which the term loans were not serviced by the company (in liquidation) and the rate of interest in the consortium agreement as well as penal interest. The court after hearing all these secured creditors, who had given term loans to the company (in liquidation), finds and holds that they are all entitled to their dues with the agreed rate of interest to be compounded in accordance with the terms of the agreement upto the date of winding up of the company (in liquidation). They are also entitled to penal interest. In view of Central Bank of India v. Ravindra, they will not be entitled compounding of penal interest. The interest after the date of winding up of the company (in liquidation) may be considered only if sufficient amount is left after the dues of secured creditors and workmen are computed on pari passu basis under Section 529A of the Act at simple interest rate of 4% per annum. With regard to working capital loans the bank and financial institutions have not addressed any argument as they are satisfied with the amount adjudicated by the OL. The foal calculation of the debt of IDBI Ltd, IFCI Ltd. and ICICI Ltd. (assigned to Kotak Mahindra Bank Ltd) a the agreed rate of compound interest and penal interest (not compounded) given by their counsel Shri Om Prakash Misi a is as follows:
KOTAK MAHINDRA BANK LTD
First Loan- Rs. 400 lacs
Rate of interest- 12%
Penal interest- @ 1% amounting to Rs. 547 lacs
Second Loan- Rs. 100 lacs (Rs. 75 lakhs disbursed) Rate of interest 12%
Penal interest @ 1% amounting to Rs. 61.59 lakhs Total penal interest Rs. 609 lacs (penal interest not compounded)
IFCI Ltd.
First Loan Rs. 300 loans
Rate of interest 11.85% per annum payable half yearly Penal nterest @ 2% per annum amounting to Rs. 224 lakhs
Second Loan Rs. 100 lakhs
Rate of interest- 11.85% per annum payable half yearly Penal interest @ 2% per annum amounting to Rs. 12.13 lakhs
Third Loan Rs. 24 lakhs
Rate of interest 14% per annum payable half yearly Penal interest @ 2% per annum amounting to Rs. 11.26 lakhs Total penal interest Rs. 247 lakhs (penal interest not compounded)
IDBI Ltd.
First Loan Rs. 2300 lakhs
Rate of interest 11% per annum payable half yearly Penal interest @ 0.5% per annum amounting to Rs. 303 lakhs
Second Loan Rs. 700 lakhs
Rate of interest 11.85% per annum payable half yearly Penal interest @ 2% per annum amounting to Rs. 932 lakhs
Third Loan Rs. 100 lakhs
Rate of interest 14% per annum payable half yearly Penal interest @ 2% per annum amouting to Rs. 163 lakhs Total penal interest Rs. 1398 lakhs (penal interest not compounded).
THE UTTAR PRADESH POWER CORPORATION
111. Heard Shri W.H. Khan, learned Counsel appearing for U.P. Power Corporation.
112. The Corporation had filed an application (A-68) for directions to the OL to register their claims. The application (A-70) filed by the Corporation under Section 530 of the Companies Act in April 2002 to register their claims for payment of electricity dues of Rs. 22,96,85,962.50. The OL was required to submit his comments on the application.
113. Shri W.H. Khan, appearing for the U.P. Power Corporation, submits that the corporation supplied electricity to the residential colonies of the company tin liquidation) under the orders of the Court. He submits that the Corporation is bound by writ of mandamus and that electricity dues along with late payment surcharge for the period after the date of winding up are to be paid by the OL in preference all other claimants. The electricity bills prepared under the statutory provisions must be paid by way of liquidation expenses to the corporation. If the Court is not inclined to pay these wages as liquidation expenses, the payment of these bills should be treated as secured debts.
114. Shri V.B. Singh, Senior Advocate appearing for IDBI and IFCI; Shri Om Prakasli Misra appearing for Kotak Mahindra Bank Ltd; Shri S.N. Verma, Senior Advocate appearing for State Bank of India; Shri V.K.S. Chaudhari, Senior Advocate appearing for Allahabad Bank and Shri J. Nagar appearing for Life Insurance Corporation, all secured creditors, submit that the electricity dues incurred after the date of winding up are not liquidation expenses to be paid in parity to secured creditors and workmen's' dues under Sections 29, 529A and 530 of the Act. It is submitted that the liquidation expenses or those expenses, which the OL has to properly incur in preserving, realizing or getting in assets. They have relied upon provisions of Sections 456, 457, which enumerating the powers of the OL for preserving and sale of assets of the company (in liquidation) and Rule 338 of the Rules of 1959. Shi S.N. Verma has relied upon the proviso to Section 529(2) of the Act which reads as follows:
Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to pay, his portion of the expenses incurred by the liquidator including provisional liquidator, if any, for the preservation of the security before its realisation of the secured creditor.
115. The directions of the Court for continuous supply of the electricity to the residential colonies of the workmen were made at the instance of the workmen, w ho were living in the quarters. It is reported that about one third of the quarters were occupied by the officers and employees of the District Magistrate, Superintendent of Police and District judiciary of district Sonbhadra. The directions were issued by the Court in liquidation proceedings for realization of the house rent and electricity charges for the Government servant occupying the company accommodations. The workmen, however, were exempted as it was found that they are entitled for payment of the dues and they have not received salaries since 12.7.1998.
116. In Textile Labour Association and Anr. v. Official Liquidator and Anr. the ONGC Ltd. supplied gas to Ambica Mills Ltd. in pursuance of the directions issued by the Supreme Court on 17.10.1997 in IAs Nos. 168-78 by the Official Liquidator with directions that out of the assets of the company (in liquidation) the dues of ONGC Ltd. are required to be paid off first and the question or making any payment to any other creditors can arise only out of the surplus, if any remaining, after the full dues of ONGC Ltd. have been paid of. In a review petition, the Supreme Court relied upon Supreme Court Bar Association v. Union of India and held that the Supreme Court in exercise of its powers under Article 142 cannot ignore any substantive statutory provisions dealing with the subject. It is only residuary powers supplementary and complementary to the powers specifically conferred on the Court by Statutes exercisable to do complete justice between the parties, wherever it is just and equitable to do so. It is intended to prevent any obstruction to the extreme of justice, Paras 8, 9 and 10 of the report relevant for the purposes of claim of the UP Power Corporation are quoted as below:
8. The effect of Sections 529 and 529A is that the workmen of the company become secured creditors by operation of law to the extent of the workmen's dues provided there exists secured creditor by contract. If there is no secured creditor then the workmen of the company become unsecured preferential creditors under Section 529A to the extent of the workmen's dues. The purpose of Section 529A is to ensure that the workmen should not be deprived of their legitimate claim in (he even of the liquidation of the company and the assets of the company would remain charged for the payment of the workers' dues and such charge will be pari pass a with the charge of the secured creditors. There is no other statutory provision overriding the claim of the secured creditors except Section 529A. This section overrides preferential claims under Section 530 also. Under Section 529A the dues of the workers and debts due to the secured creditors are to be treated pari passu and have to be treated as prior to all other dues.
9. Therefore, the law is clear on the matter as held in UCO Bank case that Section 529A, will override all other claims of other creditors even where a decree has been passed by a Court.
10. Therefore, claims, if any, of ONGC will have to be worked out in accordance with Sections 529 and 529A of the Companies Act as well. The contention advanced on behalf of ONGC by Shri Raju Ramachandran that if mandamus had been issued, it will prevail over any law is not tenable and is rejected.
117. In order to effectively, liquidate the company in which the payment to the workmen is a condition precedent in settling the dues from the realization of the assets the Court gave certain-directions to the UP Power Corporation not to disconnect the electricity and to continue to raise the bills to the OL. If the electricity was disconnected the workmen could have been restless as their families could have seen untold hardships. The Court issued directions to supply continuous electricity for the welfare of the workmen and their families.
118. In order to avoid unrest and to calm down the workmen an interim, order was passed directing that the UP Power Corporation be paid a sum of Rs. 7 Crores as 10% of their dues as claimed by them along with late payment surcharge with an undertaking that this amount shall be adjusted ill the final dividend. It now appears that this payment was over and above made due to the UP Power Corporation.
119. The question that falls for consideration is whether in the given situation in which the orders were passed to continue to provide electricity, at the instance of the workmen the electricity charges are expenses properly incurred in preserving, realizing or getting in assets as provided in Section 457(2) of the Act illustrated in Rule 338 of the Rules of 1959. There was no mining or production, carried out in the company (in liquidation) after the winding up order. The then management continued upto 31.7.2001 and the OL did not pass any order to carry out any business activity. The directions to supply continue electricity were not given for the purposes of preserving, realizing or getting in-the assets but by way of a facility to the workmen, to continue to live in the accommodations till they are paid then dues. Article 21 of Constitution of India provides that no one shall be deprived of his life and liberty except in accordance with the law. The Supreme Court has interpreted the right to life to, include to right to live with dignity. The delay caused in sale of assets virtually deprived the workmen who were entitled along with secured creditors to have charge over the assets to pay their dues. Though they could be asked to vacate the quarters under Section 630 of the Act, it was not equitable or just for the Court to have directed their eviction or to allow them to live without the basic amenities like electricity, water, primary education, and health services. The Court was under the constitutional duty to accept the request of the workmen to provide them basic amenities for a decend and dignified life. The directions to continue to supply electricity as such were issued for effective liquidation of the company (in liquidation) and for proper and smooth sale and transfer of the assets to the purchaser. The Court cannot foresee a situation, which may nave arisen in the long process of liquidation in refusing to provide basic amenities of the life to the workmen. The continuous supply of the electricity o the residential accommodations provided to the workmen was absolutely essential for effective liquidation of the company (in liquidation) and thus these charges can be included along with the charges of security, inspections, valuation, expenses of settlement claims committee etc., in the liquidation expenses to be borne by the OL for effective winding up of the affairs of the company mid for distribution of its assets. The proviso to Sub-section (2) of Section 529 will not be attracted as it is applicable in a situation where secured creditor, instead of relinquishing his security and proving for his debts, proceeded to realise his security and for that purpose the liquidator to bear the expenses for preservation of security before its realization. The workmen cannot be treated to be secured creditors, who do not relinquish their security and proceed to realize their debts as security.
120. the liquidation expenses have not been defined in the Act or the Rules. The OL, however, is required in law under Section 457 of the Act to protect and preserve the properties of the Company (in liquidation). He has also powers under Rule 457(1)(e) to do all such other things as may be necessary for winding up lo affairs of the company and distributing its assets. In order to sale the properties, the OL may be required to employ security for protection and dissolution of the assets, institution and defend the suit for prosecution to carry on business of the company so far as may be necessary for beneficial winding up of the company and to raise on the security of assets in requisite money. All these powers under Section 457(1) are necessary for the purposes of effective liquidation.
121. The judgment cited by Shri V.B. Singh, Senior Advocate in Wonder Jupiterchit 1992 (74) CC 215 by Kerela High Court is as such not applicable lo the facts of the case. The ratio of the judgment in Textile Labour Association (supra) is also not attracted as in the said case the directions to supply gas were given by the Apex Court on 15.4.1987 before the company was wound up by the High Court on 17.1.1997. The ONGC Ltd. as such was only a unsecured creditor. The mandamus issued by the Supreme Court did not help ONGC Ltd. for recovering its dues as the sale proceeds could be distributed only in accordance with Section 529 and 529A of the Act.
122. Having settled the issue that the electricity dues are part of the liquidation expenses, objections were raised with regard to correctness of the bills raised by the UP Power Corporation Ltd. The State Government in the MOU had announced waiver of the electricity dues of Rs. 110.10 crores. The UP Power Corporation found that in fact these waivers are only to the extent of Rs. 76.40 crores. According to Shri W.H. Khan, the waiver was only in respect of the electricity for industrial use and not for domestic consumption. He has placed on record a scheme by which the dues to the extent of Rs. 76.40 crores of the three divisions were waived. According to affidavit filed by Slid W.H. Khan the entire industrial dues were waived while keeping the amount for domestic consumptions which were not waived. These amounts will not tie liquidation expenses as the electricity prior to the date of winding up was riot Supplied to the residential colonies under the orders of the OL or under the orders of the Court.
123. Three meters insalled at single points feeding the colonies were not maintained properly. The reading were not regularly taken and the bills were initially prepared on LMB-6 (industrial use). In his report the OL submitted:
6. U.P. POWER CORPORATION LETD. : (Annexure No. 6)
There are two divisions, responsible for supply of electricity to the various units of the company under liquidation, namely Sonbhadra and Mirzapur division. No documents or statement of power units consumed upto 31.3.1999 in various units and colonies of the above said company was made available to the committee, despite demand and explanation raised with the competent authorities of the respective divisions of U.P. Power Corporation. In the above circumstances we have-admitted 50% of the arrears so claimed.
For the period, April 1999 to May 2006, the following adjudications were undertaken:
a. Sonebhadra Division
The units of electricity consumed in residential colonies of Dalla unit is 603X40 from June 2001 to March 2006. From April 2006 onwards unit of electricity consumed as per meter reading was less than 50% of 603840 units of electricity supply shown. From perusal of statement of meter reading for the period under consideration, it is abundantly clear that feeding was not undertaken on regular basis. As such, the electricity bills for the units consumed have been claimed arbitrarily. Under the given circumstances and after due consideration the committee decided to pay 60% of the amount as claimed for Dalla residential colony. The committee has not considered the claim with regard to Late Payment Surcharge (LPS).
For other units i.e., Churk colony and Gurma colony, the committee has considered 100% of the claims against the units of electricity consumed as per the statement submitted by the Sonebhadra Division.
b. Mirzapur Division
The documents submitted on affidavit for claim is upto may 2006. In reply to our queries the officers of the Mirzapur Division submitted monthly consumption of power by the ex-workers residing at Chunar residential colony and the Water Pump House at Chunar. After verification 100% of the claimed amount for Power consumption except Late Payment Surcharge (LPS) has been admitted for Chunar residential colony. For the period April 1999 to 06.02.2002, we have observed that from December 2002 to May 2006, bills were raised for 181315 units of power consumption. The monthly consumption as claimed by the division from Feb 2002 to Nov 2002 were too high in variance and appears p have been made arbitrarily. Considering the above facts the claim committee has admitted 66.33% of the claimed amount for the period 7^th February, 2002 to 31^st May, 2006.
c. Jamuhar Tubewell, Sonebhadra:
Details of monthly electricity consumption were not made available to the committee. The claim includes Late Payment Surcharge (LPS). As such, 50% of the amount claimed has been admitted.
124. Shri W.H. Khan, appearing for U.P. Power Corporation in support of objections/application (O-9), has filed copies of the bills of September 2006, October 2006 and November 2006 as well as copies of the bills upto 31.3.1994. During the course of argument, it was found that these bills include the period prior to the date of winding up. Shri W.H. Khan took time and has filed four supplementary affidavits. The first supplementary affidavit sworn by Shri Ram Saran, Executive Engineer, Electricity Distribution Division-1, Mirzapur is dated 17.1.2007. The second supplementary affidavit of the same officer is dated 22.1.2007. The third supplementary affidavit of Shri Gopal Singh, Executive Engineer, EDD, Robertsganj, Sonebhadra is dated 23.1.2007 and that List improved supplementary affidavit, filed during the course of submissions made by Shri W.H. Khan, is affirmed by Shri Gopal Singh, Executive Engineer, EDD Robertsganj, Sonbhadra. The details of the bills given in the last supplementary affidavit are given as below:
(a) The total principle amount upto 8.12.1999 is Rs. 22,760,039-67 & late payment surcharge is Rs. 5,04,14,689-33, and from. 9.12.1999 to 11.10.2006 is Rs. 2,11,411,565-08 & late payment surcharge is Rs. 37,49,27,458-58 and from 12.10.2006 to Jan, 2007 is Rs. 7,367,365-57 & late payment surcharge is Rs, 570,110,576-18. The total principle amount comes to Rs. 241, 538, 970-32 and total late payment surcharge comes to Rs. 570,110,576-18. True copy of the calculation chart showing break up of the arrears, the principle amount and late payment surcharge in respect of residential colonies of Churk, Dala & Gurma is being filed herewith and marked as Annexure SA-1 to this affidavit.
(b) Similarly the principle amount of Chunar residential colony upto 31.3.1999 is (-)1,73,505/- and Jamuhar Tube Well is Rs. 1,09,198/-. From 1.4.1999 to 8.12.1999 of Chunar residential colony the principle amount is Rs. 47,69,536 & late payment surcharge is Rs. 2,45,844/-. The principle amount of Jamuhar Tube Well is Rs. 9, 61, 352/- & late payment surcharge is Rs. 66,025/-. For the period 9.12.1999 to 11.10.2006 the principal amount of residential colony of Chunar is Rs. 4,48,93,442A & late payment surcharge is Rs. 3,58,72,607/-. The principle amount of Jumuhar Tube Well is Rs. 98,70,487/- & late payment surcharge is Rs. 79,99,687/-. For the period i.e. From 12.10.2006 to 31.1.2006 the principle amount of Chunar residential colony is Rs. 30,86,935/- & late payment surcharge is Rs. 24,32,168/- and of Jamuhar Tube Well the principal amount is Rs. 1,71,057/- and late payment surcharge Rs. 6,01,831/-. thus, the total principals amount of Chunar residential colony upto 31.1.2007 comes to Rs. 5,25,76,408 & late payment surcharge Rs. 3,85,50,619/- and of Jumuhar Tube Well the principal amount comes to Rs. 1,11,12,094 & late payment surcharge comes to Rs. 86,67,543/-. True copy of the calculation chart showing break up of the arrears upto the principal amount and late payment surcharge in respect of Chunar residential colony & Jamuhar Tube Well is being filed herewith and marked as Anenxure SA-2 to this supplementary affidavit.
125. It has been found that the supply of the electricity under the orders of the Court was absolutely necessary to maintain industrial peace as well as to protect and preserve the assets of the company (in liquidation). The UP Power Corporation as such is entitled to the actual bills for supply of the electricity. It is, however, found from these bills that a large component of these bills is of late payment surcharge. Shri W.H. Khan submits that late payment surcharge is part of statutory tariff and as such the Court may not deny the amount to the UP Power Corporation. He has relied upon the UP Electricity Supply Code 2Q05 and the rate schedule of the UP Power Corporation Limited, as per Order dated 10.11.2004 of UP Electricity Regulatory Commission, effective from 1.12.2004. Para 6.7 of UP Electricity Supply Code, 2005 and para 12 of Rate Schedule LMV-2, effective from 1.12.2004 are quoted as below:
Uttar Pradesh Electricity Supply Code, 2005
6.7 Late Payment Surcharge
In case of dispute regarding levy of surcharges, the licensee shall settle the dispute within in two billing cycles from the date, of protest by the consumer after giving him opportunity for reply and personal hearing.
Rate Schedule LMV-2
12. Surcharge/Penalty:
(i) Delayed Payment
If the bill is not paid by the due date specified therein, a late payment surcharge shall be levied @ 1.25% per month upto first three months and subsequently @ per month. Late payment surcharge shall be calculated proportionately for the number of days for which the payment is delayed beyond the due date specified in the bill and levied on the unpaid amount of the bill excluding surcharge. This surcharge is without prejudice to the right of the Licensee to disconnect the supply or take any other measure permissible by law.
(ii) Charges for exceeding Contracted Demand:
If the maximum demand in any month of the consumer having TVM/MDI/TOD meters exceeds the Contracted Load, such excess demand shall be levied at twice the normal rate.
This additional charge shall be without prejudice to the licencees right to take such other appropriate action including disconnection of supply, as may be deemed necessary to restrain the consumer from exceeding his contracted load.
126. The statutory provision of levy of late payment surcharge in the UP Electricity Supply Code, 2005 made in exercise of powers conferred by Sections 50 and 181 read with Sections 43 to 48, 50, 55, 59 of the Electricity Act, 2003 ( Act No. 36 of 2003) by the U.P. Electricity Regulatory Commission, provides that licensee shall settle the dispute regarding levy of surcharges within in two billing cycles from the date of protest by the consumer after giving him opportunity for reply and personal hearing. The Rate Schedule (LMV-2) in para 12 (i) provides for late payment surcharge @ 1.25% per month upto first three months and subsequently @ 1.5% per month.
127. The electricity supply was given to the colonies and Jamuhar Tube Well under the orders of the Court. The OL did not have any money in his account for payment of these bills until the amount was realised from the sale of the assets of the Company (In Liq.). There was as such no question of default and willful non-payment by the OL. The electricity supply was allowed to be maintained in the; extraordinary situation. Although, the workmen and officers & employees of both the Company (in liquidation) and State Government were in occupation of residences in the colonies, the liability of payment of bills is of the OL under the supervision of the Court and then to collect from the State Government employees and unauthorised occupants. In the circumstances it cannot be said that those workmen, who are not getting salaries and were virtually starving and that the OL committed am default or were in a position to raise any dispute with regard to quantum of the bills. The workmen have protested to these bills on the ground that the electricity supply was limited to a few hours in a day and that a large number of unauthorised connections were taken out of main supply and further that a large number of stone crushers were operating illegally from the same supply in connivance with the officials of the power corporation, the Court, however, is not taking cognizance of these complaints a it is not the appropriate stage to do so. The fact remains that the electric supply was given in pursuance of the order of the Court and that OL or the Court cannot be treated to be defaulter for payment of late payment sun urge. The OL had no money in the account of the company and as such he was not in a position and could not have paid or even raised a dispute The bills of the UP Power Corporation given in supplementary affidavit of Shri Gopal Singh dated 20.2.2007 are admitted to proof except late payment surcharge. The OL shall make payments of the actual bills except the late payment surcharge to the UP Power Corporation upto the date of declaration of final dividend. In compliance with these orders, the interim payment of Rs. 7 crores made to the UP Power Corporation in compliance of the order dated 22.11.2006 shall be adjusted out of the final payment. It is made clear that the OL will not be liable to make payment of electricity charges after the declaration of final dividend. The disbursement has been stayed by Hon'ble Supreme Court in SLP (Civil) No. 19132 of 2006 RPJ Mineral Pvt. Ltd. v. S.K. Saxena and Ors. on 9.2.2007. The final disbursement of the amount, shall be made only after the decision and in terms of the orders of the" Supreme Court. The electricity supply will continue until the logical conclusion of these proceedings and the amount is disbursed to the workmen after its final adjudication or under the orders of % the Supreme Court, as the case may be.
UP CEMENT VETAJVBHOGISAHKARI RIN SAMITI Ltd. CHURK (UPCVSRNL)
128.Shri W.H. Khan and Shri Ravi Prakash Srivastava, appearing for the UPCVSRNL. have prayed for condonation of delay for their application/objection (0-85) and have prayed for a deduction of Rs. 34 lacs from the salary of the workmen of UP Cement Corporation Ltd. (in liquidation) to lie paid to the society and further an amount of Rs. 94 lacs is due against the members/employees, which have not been deducted by the Company (in liquidation) may be got paid to the appellant-society from the amount which the members/employees have to get after settlement of their claims by the OL.
129. It is stated that the UPCVSRNL is a cooperative society of the workmen established for their welfare. The entire records of the society are under the lock of the OL in the premises at Churk factory district Sonbhadra. The Claims Committee has illegally and arbitrarily rejected the claim of the society. The rejection order has not been served. He has prayed for condonation of delay. The cause; shown is sufficient. The delay is condoned.
130. The cooperative society was established for the benefit of the workmen, in 2003 (Vol 115) Comp Cases 207 Bank of Baroda v. Nutan Mills Mills Employees Cooperative Credit Society Ltd., Gujarat High Court in the matter of winding up of the company held that the sums outstanding to the cooperative society of the workmen from the company are to be treated as wages in arrears. Hon'ble Justice R.K. Abichandani and Hon'ble Justice A.K. Trivedi, relying upon Baroda Spinning and Weaving Mills Co. Ltd. v. Baroda Spinning and Weaving Mills Cooperative Credit Society Ltd. (1976) 4 Comp Cas 1, held that the amount like a trust money and that the credit society can make a preferential claim before the exercise of distribution of the proceeds realised by disposing of the assets of the company. The details of the defaults made by the workmen apparently on the ground that the wages were not paid since Jule 1998 have been enclosed along with affidavit of proof of debt1 submitted by Shri Prem Chandra, ADO Cooperative, Chapka Block Robertsganj, District Sonbhadra/Liquidator, UPCVSRNL. From these affidavits, it appears that Deputy Registrar. Cooperative Societies, Vindhyachal Region, Mirzapur has passed orders under Section 72(2)(c) of the UP Cooperative Societies Act 1965 for winding up of the cooperative society appointing Shri Prem Chandra. ADO, Cooperative as the liquidator. The claim also includes the details of the dues and the list of the workmen, who are liable to pay these dues.
131. The amounts do not exceed more than few hundreds and in some cases few thousands of the workmen. The Court as such finds that these dues of the cooperative society (in liquidation) have to be paid treating them to the workmen's dues as preferential payment. The application/objection is allowed. The OL is directed to deduct the amount from each of the defaulter workmen, list of which is given along with 'proof of debt'. The interest, however, calculated @ 12% shall not be payable to the cooperative society as these defaults cannot be said; to be made by the concerned workmen intentionally. The defaulter-workmen were not getting their wages since July 1998 and a such they will not be liable to pay the interest both 6% calculated in the chart of the defaults as well as 12% in calculation of the total amount annexed to the 'affidavit of proof of Shri Prem Chandra, ADO Cooperative/Liquidator of the society.
132. Shri W.H. Khan very fairly quantified this amount to Rs. 34 lacs to be deducted from the salaries of the employees, a list of which is included with the 'affidavits of proof' and further an amount of Rs. 94 lacs. The OL will deduct the interest component of this amount and shall make the payment 10 the Registrar, Cooperative Societies, UP for payment in the account of the UPCVSRNL (in liquidation) to be utilised in the manner in which it is provided under the UP Cooperative Societies Act.
LIQUIDATION EXPENSES
133. Out of total sale proceeds, of Rs. 459 crores, the OL has made available for Rs. 435 crores for distribution leaving 24 crores towards. liquidation expenses. The details and break up of the liquidation expenses, have not been provided in his report.
134. Section 457 of the Companies Act, read with Rule 338 of the Company (Court) Rules 1959, provides for liquidation expenses payable out of assets in a winding up by the Court. The assets of the company in a winding up be the Court remaining after payment of fees and expenses properly incurred in preserving, realising or getting in the assets, shall, subject to any order of the Court and to the rights of the secured creditors, if any, be liable to the payments, the table of which in descending order is provided in Rule 338. Firstly, the taxed costs of the petition, then costs and expenses of the persons in making the companies statement of affairs, then necessary disbursements of the Official Liquidator other than expenses properly incurred in preserving, realising or getting in the properties of the companies; the cost of any person properly employed by the Official Liquidator; the fees to be credited to the Government under Section 451(2) and the actual out of pocket expenses necessarily incurred by the members of the Committee of Inspection, and sanctioned by the Court are to be paid by the OL. In the present case following persons have claimed the amounts which may be included in liquidation expenses:
1. Cost of security in preserving assets.
2. Cost of valuation of the assets.
3. Cost of the advertisement for sale.
4. Cost of members of asset sale committee.
5. Cost incurred by the OL in transportation, preservation and making copies of the records for being given to the workmen for securing employment as retrenched employees.
6. Cost of the committee appointed for making inventories of the accommodation, occupation of the workmen and for deciding their objections.
7. Cost of the settlement claims committee.
8. The dues of UP Power Corporation for domestic supplies and to tube well, both under the orders of the Court as well as the orders of the local administration.
9. Cost of running the schools and the salaries of teachers and other staff of such schools which were taken over by the OL from the corporation.
10. Costs to be incurred on salaries and wages of the officers and employees for maintaining water and electricity supplies to the residential colonies.
11. Costs of salaries and expenses of maintaining Churk and Dalla provident fund account.
12. Cost of salaries and other expenses for maintaining dispensaries for health care of the workers.
13. Other miscellaneous costs which were necessary for preserving assets of the company.
135. Secured creditors have raised dispute with regard to payment of electricity and salaries of the teachers & staff for water and electricity expenses and staff for maintaining Churk and Dall provident fund account and the cost and expenses for security staff of the company upto 31.7.2001 under the orders of the then management of the corporation continuing even after winding up till the OL took over the possession. These objections have been raised on the ground that facilities given by the court to workmen, shop keepers, government officers and other authorised or unauthorised persons living in the colonies or occupying the company properties without any legal authority cannot be legally incurred by the OL. The secured creditors submit that these facilities which were essential services were incurred for the benefit of the workmen and that the workmen must pay for these facilities from out of the amount reserved for them. These expenses cannot be apportioned between the secured creditors and the workmen as these expenses cannot be treated to be properly incurred for preserving and maintaining the assets for their sale and distribution.
136. Shri Yogesh Agarwal and Shri K.C. Vishwakarma appearing in Appeals/Objections No. 0-47 (primary school teachers of Chunar), No. O-48 (primary schools teachers of Dalla), O-73 (Secondary school teachers and 11 staff of Churk). O-74 (Primary school teachers of Dalla) and 0-75 (primary schools teachers of Churk); Shri Narendra Mohan appearing for staff of the EPF trust; Shri P.N. Saxena appearing for watch and ward stall and Shri Ashok Kumar Srivastava appearing for staff maintaining electricity and water supplies submit that right of the employees under Articles 19 and 21 the Constitution of India do not get suspended on the winding up of the company order to effectively liquidate the company and for protecting and preserving the assets, which was necessary that the workmen should have occupied the houses as they were involved in preserving assets but were also provided sufficient check in theft and dissipation of the goods of the company which were spread over 80 kms areas including factory sides, colonies and mines. The Court recognised these rights and both as ex workmen and citizens of the country and allowed workmen to stay in the colonies and for their health, education of their children and for maintaining power and water supplies. The winding up of the corporation wholly owned and controlled by the State does not cease to take away its liabilities towards the workmen until they are paid their dues in full. The OL simply steps in shoes of the company and has to safeguard the fundamental rights of the workmen. Shri. Yogesh Agarwal has relied upon judgment in Kapila Hingorani's case 2003 (5) JT SC 1 in support of the submissions and has further relied upon Article 23 of the Constitution of India which prohibits 'begar'. He has also relied upon Article 21A of the Constitution of India which gives guarantees to the children upto age of 14 years to receive free education. The legitimate expectation of the workmen to continue to live in the colonies with dignity until they are paid can only be defeated by overriding public interest. In the present case no such public interest intervened in their rights to continue in the colonies and to receive the basic amenities which are required for dignified life.
137. The primary school of the company (in liquidation) at Churk has 600 students and the primary school at Chunar has 257 students. The 10 primary school teachers and employees of Dala; 06 primary school of teachers; staff of Chunar and 22 primary school teachers of Churk have relied upon the orders of the General Manager of the company dated 24.3.2000 and court's orders dated iS.8.2001 to allow these primary schools to continue. These schools were handed over to OL on 3.8.2001.
138. It cannot be said that running of these schools was business of the company (in liquidation). The workmen were however living in the colonies, and their children could not be ignored by the OL and the Court. The State under Article 21A of the Constitution of India guarantees free education the children upto age of 14 years. The State has a corresponding duty to provide facility for free education. The OL is an officer of the Central Government and Court are also state within the meaning of Article 13 of the Constitution of India. The OL as such could not have ignored fundamental rights of the children of the workmen living in the colonies of education in the schools which were run by the company (in liquidation). The business of the company under Section 445(iii) of the Act of 1956 includes all incidental activities. The OL as such was under constitutional duty to provide facilities of primary school to the children of the workmen. The Court had directed the Secretary of Education (Primary) Government of UP to take over these schools under 'Sarva Shiksha Abhiyan Scheme'. The Secretary of Education (Primary) Government of UP had appeared in the Court and had informed that a proposal in this regard has been put to the State cabinet. The State Government thereafter agreed to take over these schools and consequential orders were issued. District Basic Education Officer and District Magistrate, Sonbhadra directed the OL to hand over the building and land of the primary schools so that salaries may be disbursed. The request surprised the Court as the Government Order which translated the decision of the State cabinet to take over the schools was not communicated to the Court earlier than the confirmation of the sale of assets. The matter with regard to taking over schools are still pending in special appeal in the Court.
139. The fundamental right of the children to receive primary education in the schools, which are so available, run in the premises of the company (in liquidation), which have not yet been handed over to the purchaser, would compel the OL to pay the salaries of the Assistant Teachers and employees of these primary schools. These expenses as such will be charged on the liquidation expenses and shall be paid as liquidation expenses by the OL until the schools are taken over by the State or till the purchaser takes over these schools and makes arrangement for education of the children. On such date, the liability of the OL to pay salaries of headmaster, teachers and staffs, of these primary schools will come to an end. The appeals/objections No. O-47, O-48, O-74, O-75 are allowed. To that extent, the appeal/objection No. O-73 by Secondary School Teachers at Churk, who was appointed as, Lecturer (Physics) visiting teacher cannot be considered as all the secondary schools have been taken over by the State Government and that salaries only those teachers were not disbursed who were teaching classes for which the grant-in-aid was not given Shri Mahaveer in his appeal/objection No. O-73 was visiting teacher appointed on a consolidated salary. His salary as such cannot be disbursed by the OL and his appeal/objection is accordingly dismissed.
UNSECURED CREDITORS
140. The appeals/objections O-13 ( Executive Engineer, PWD, Auraiya and O-23 to 27, O-28 (Parash Nath Cement Pvt. Ltd), O-29 to 34, O-44 and by the Forest Department, O-61 to 63, O-81 & 82, O-88 have been filed by the Government departments unsecured creditors, who had completed works or made advanced for supply of cement. Some of these unsecured creditors are dump/depot holders/transporters with their claims against the company (in liquidation). These persons falling in the category of unsecured creditors. Having parth admitted the appeals/objections of the secured creditors and workmen and having separated the amounts detailed in the order as liquidation expenses, there will be no amount left to be paid to the Government departments and unsecured creditors under Section 530 of the Act. The considerations of the appeals/objections of secured creditors and workmen has not left amount to be paid in full to the secured creditors and workmen and that a pari-passu deduction has to be made of their admitted claims under Section 529A of the Companies Act 1956. In the circumstances, the determination of admittance of proofs of their claims of the State Government departments and unsecured creditors as well as their appeals/objections are dismissed. Some of these appeals by Government departments and unsecured creditors were decided separately and that all were dismissed.
Nagar Panchyat Churk/JAIL
141. Nagar Panchayat Churk has filed their objections O-2 through Shri U.N. Shanna, Senior Advocate assisted by Shri Ravi Shanker Prasad with regard to exclusion of 30 shops constructed at old plot 933 Gata No. 933 new numbers 438/439 area 0.4746 hectares, on which the Nagar Panchayat Churk had constructed the shops after sanction of the map by Sub Divisional Magistrate of notified area/prescribed authority, on 15.4.1991 These objections are not to be considered and adjudicated in these appeals/objections under Rule 164 of the Companies (Court) Rules 1959. These will be considered separately considering the reply given by Official Liquidator and JAL. Similarly objection 0-86 filed for separating the area acquired and on which a Jail is being constructed shall be considered separately
SHRI G.S. BIRDI, VALUER
142. The appeal/objections (O-53) is filed by Shri G.S. Birdi, a registered valuer on the panel of the OL for settlement of the bills out of the liquidation lunds. He has claimed Rs. 33 lacs as his fee for valuation based on rules framed under the Wealth Tax Act in terms of the orders passed by this Court in special Appeal No. 271 of 2002 by Grasim Industries Ltd. and Special Appeal No. 316 of 2003 by State of UP.
143. Shri Pankaj Bhatia appearing for G.S. Birdi states that the valuation was carried out in accordance with the rules in pursuance of the orders of the Court and thus the amount may be charged to the liquidation expenses of the Company (In Liquidation).
144. The assets of the company (in liquidation) were valued by Shri A.F. Furgusan &. Company in 1995 in pursuance of the directions of BIFR. Thereafter, Shri N.K. Agarwal, a registered valuer valued the assets in the year 2001. These two valuations were the basis of documents of sale prepared by the State Government. The third valuation by Shri G.S. Birdie was in act revaluation of the assets for which he had sufficient material available on record in the reports of A.F. Fargusan & Company and N.K. 4 Agarwal. Shri G.S. Birdie did not carry out any fresh measurements of the mines, factories, building, plant and machinery etc. He did not prepared any fresh inventories of the stores and material lying on the spot.
145. There is difference between the valuation of the properties and 3 revaluation which is based on earlier reports. In the cases of revaluation the valuer may only verify the measurements and inventories of the earlier valuation and may include such items which were left or have to be added to the valuation or which may have stolen or destroyed. In any event of revaluation, the valuer is not required to carry out the same extensive exercise. His job in revaluation is much simple and is confined to verification rather than valuation.
146. Shri Pankaj Bhatia, learned Counsel appearing for G.S. Birdie left the matter of settlement of his bills to the discretion of Court. The discretion given to the Court in such matters cannot be exercised arbitrary or unreasonably. It must be based on sound judicial principles, which rest the claim on statutory provisions or precedents. Shri Pankaj Bhatia did not cite any rule or precedent which may give an indication to the court for exercising its discretion. In the circumstances, the Court is left to exercise discretion on the basis of the work done by the valuer taking into account the earlier two reports. The Court finds that 50% of the amount claimed by him, which may include his expenses and the fees of the services which he may have hired, would be sufficient to cover his expenses and fees for revaluation of the assets of the company (in liquidation). The OL will charge this amount to the liquidation expenses.
EMPLOYEES LOOKING AFTER EPF TRUST DALL AND EPF TRUST CHURK
147. The officers and workmen maintaining electricity supply, water supply, teachers in primary school, staff of the dispensaries, workmen employed for security of the godowns and stores by the management, and the officers and staff managing the Employees Provident Fund Trust Churk and Employees Provident Fund Dalla have claimed their salaries from the liquidation expenses. They have relied upon orders passed by the Court by which the Court directed the electricity and water supplies, schools and hospitals to function. I have already found that the officers and staff maintaining water and electricity, primary education and health are entitled to some token which is yet to be determined from the liquidation expenses. The situation of employees looking after the employees provident fund trust is slightly different.
148. The LPF Trusts Dall and Churk were exempted from the provisions of the Employees Provident Fund and Miscellaneous Provisions Act 1954. These trusts were run and managed by the company (in liquidation) and the administrative expenses over and above the expenses charged to the trusts were borne to the company (in liquidation). If there was any shortfall in the payment of interest, the same was also required to be borne by the company (in liquidation). Some complaints were made with regard to irregularities in the trusts on which orders were passed on 19.5.2005, 14.7.2005 and 5.4.2006 under which the trusts were directed to be handed over to the EPF Commissioner and audited by the Chartered Accountant nominated by the EPF Commissioner. The accounts of these trusts were finalised for which the EPF Trust Churk was given a sum of Rs. 50,000/- from the liquidation expenses. The EPF Trust Dalla did not claim any amount. Shri G.S. Rai, General Manager was Chairman and Shri A.K. Upadhyay, an employee of the company (in liquidation) was Secretary of EPF Trust Dalla and was looking niter the trust with three employees out of which one had retired. Shri Suhail Sultan was Secretary of the EPF Trust Churk. He was looking after the trust with the help of 06 employees. All these employees were working in the accounts department of the company.
149. The accounts of these trusts were audited and that objections made by1 the auditors were removed and that by order dated 2.8.2006 these accounts were finally transferred to the Regional Provident Fund Commissioner, Varanasi who was called to the Court on about three occasions and were given detailed directions with regard to the disbursement of the amount. On the advise of the RPEF Commissioner, Varanasi the loan transactions out of these trusts were stopped and final accounts were directed to be prepared. It is reported that the accounts are being settled with the workmen and that out of 5000 employees who are members of the trusts, almost 80% of the employees of the EPF Trust of Dall and 50% employees of EPF Trust Churk have been paid EPF amount calculated upto 12.7.1998.
150. The employee's share to be contributed to the trust from 13.7.1998 to 9.12.1999 from the wages to be paid to the workmen under the EPF scheme, ilk workmen also entitled the employer's share on this amount which was increased to 10% w.e.f. 1.5.1997. Most of the workmen covered under the Employees Pensions Scheme 1995 and that a contribution of 8.33% was.-abject to maximum of Rs. 417/- per month calculated on the contribution of Rs. 5000/- (per annum) was payable to the pension fund.
151. Now since the EPF Trust account has been closed, employee's share on the wages from 13.7.198 to 8.12.1999 may not be deducted and be directly paid over to the workmen. The employer's share also has to be paid over to the workmen by the OL except 8.33% of the amount subject to maximum of Rs. 417/- per month from out of employer's shares is to be contributed tow aids the Pension Fund 1995, if the EPF Commissioner, Dalla is entitled to employees to claim their pension w.e.f. 8.12.1999 i.e. the date when the company (in liquidation) was wound up by the Court. The winding up date will be the date on which the employees will cease to be a member of the EPF Trust and will exit from the EPF membership. The trustees clerks and employees shall be paid wages after the date of winding up in accordance with the rates given in para 189 of this judgment.
EMPLOYEES PROVIDENT FUND
152. Shri D.K. Pandey and Shri Dhanjai Awasthi appear for Provident Fund Commissioner and have filed objections O-36, on behalf of Employees : Provident Fund Commissioner, verified by Shri Gopal Ram, S.S.A. At S.R.O. : Varanasi. The workmen of the UP State Cement Corporation (in liquidation) were contributing to Employees Provident Fund Trusts at Churk and Dalla. I Both these trusts were exempted by the State Government under Section 17(1)(a) of the Employees Provident Fund and Misc. Provisions Act 1952 (EPF Act of 1952). the recommendations for grant of exemption by the Regional Provident Fund Commissioner dated October 24, 1990 under : Section 17(1)(a) of the PF Act 1952 have been placed on record along with the affidavit of Shri A.A. Siddiqui, Enforcement Officer, EPF Organisation, Allahabad.
153. In the liquidation proceedings, some of the workmen raised doubts about the manner in which the trusts were functioning. By orders passed in the proceedings the Court directed the Secretary of both the trusts namely Shri A.K. Upadhyay and Shri Suhail Sultan to hand over accounts of the trusts to the Regional Provident Fund Commissioner, Varanasi for audit by an auditor nominated by the Provident Fund Commissioner, New Delhi. Both these accounts were audited and discrepancies pointed out by the auditors were removed in a series of meeting carried out under the orders of the Court. The entire securities with the trustees were handed over to the Regional Provident Fund Commissioner, Varanasi. The accounts were finally closed and directions were issued on the recommendations of the Regional Provident Fund Commissioner, Varanasi not to disburse any further loans and to finally settle these accounts. Thereafter, detailed orders were issued by the Court, directing Regional Provident Fund Commissioner, Varanasi for verifying the claims to finally settle the claims in favour of employees by giving them appropriate interest in accordance with provisions of the trust, h is reported that most of the accounts have been settled. The court has not received any complaint from the workmen regarding any shortfall in payment of the amount including the employees contribution and interest. In these orders, the Court had made it clear that the Regional Provident Fund Commissioner, Varanasi will pay the entire employer's shares and interest which will be given to the workmen at the time of closing of the accounts and that entire administrative expenses including the audit fees shall be paid. The trustees informed the Court that the trust v as having an excess amount realized from the securities as the statutory interest was i1 reduced by the Central Government. The Employee's Pension Scheme 1995 is closely left with the Employees Provident Fund Act 1952 and Employees Provident Fund Act 1970. The part of the contribution was given in EPF Act 1995 for the purposes of payment of pension payable after the date of superannuation of the workmen. The prayer has been made on behalf of the workmen that although the accounts of trust have been closed on the date of winding up, the contribution to EPF Act 1995 from the Act of EPF be made upto the date when the possession of unit was taken over i.e. 31.7.2001 so that all the employees may get the benefit of pension calculated upto July : 2001.
154. That Shri J.K. Pandey, Assistant Provident Fund Commissioner, Sub Regional Office, Varanasi submitted claims on behalf of both these trusts, winch were handed over to RPFC Varanasi. The details of claims, claims, admitted and net dividend payable is given as below:
SI Name Unit Claimed Claim admitted Net divi dent
No. payabl e
1 J.K. Pandey Churk & Claimed 2898-46508 Asst. Provident Chunar amount
Commissioner, EPF-1952 100568970 Sub Regional 104-1971
Office, Varansi &
EPS-1995
Audit fee 238000
Total 100806970 10080 6970
2 J.K. Pandey Dalla & Claimed 155471240 Asst. Provident Chunar amount
Commissioner, EPF-1952 53797575 Sub Regional 104-1971
Office, Varansi &
EPS-1995
Audit fee 218000
Total 54015575 54015 575
3 J.K. Pandey Supple- & Claimed 1157351
Asst. Provident -mentry amount
Commissioner, Claim EPF-1952 1133746 Sub Regional for Chu- Claim
Office, Varansi rk and Processing
Dalla expenses
Audit fee 23605
Total 1157351 1157 351
Grand Total 446475099 15597 9896
155. Shri Ashok Mehta, learned Counsel appearing for Official Liquidator, has not raised any objections with regard to employer's contribution upto date of winding up on 8.12.1999 and the interest paid by EPFC Varanasi to the workmen on behalf of the trust. He, however, has raised objections with regard to any claim towards penal interest and damages under Section 7Q and damages under Section 14B for default in employer's contribution claimed by the Assistant provident Fund Commissioner, Varanasi.
156. Shri Dhananjai Awasthi was asked to substantiate the claim with regard to penal interest under Section 7Q and damages under Section 14B of, regard the EPF (MP) Act 1952. He has filed an affidavit of Shri M.L., Verma, Assistant Accounts Officer (Legal) EPFC Allahabad and thereafter on the direction of the Court, an affidavit of Shri A.A. Siddiqui, Enforcement Officer, EPFC Allahabad has been field. A perusal of the affidavit of Shri A.A. Siddiqui shows that the interest on the PF Contribution paid to the workmen in case of both the trusts is calculated on the basis of the interest notified by the Central Government. The rate of interest calculated and paid to the workmen is as follows:
"CALCULATION OF INTEREST PAYABLE TO THE P.F. MEMBER OF U.P. STATE CEMENT CORPORATION LIMITED, CHURK SONEBHADRA, P.F. CODE No. UP/423 Year Rate of Intt. P.F. Opening Interest Closing Balance P.A. Contribution Balance Payble 97-98 12% 44462622 0 1774505 1774505 98-99 12% 56206348 44362622 9470899 53833521 99-00 12% 0 111814374 13417725 125232099 00-01 11.25% 0 125232099 14088611 139320710 01-02 9.50% 0 139320710 13235467 152556177 02-03 9.50% 0 152556177 14492837 167049014 03-04 9.50% 0 167049014 15869656 182918670 04-05 9.50% 0 182918670 17377274 200295944 05-06 8.50% 0 200295944 17025155 217321099 06-07 8.50% 0 217321099 18472293 235793392 1340870709 135224422 1476095131
CALCULATION OF INTEREST OF PAYABLE TO THE P.F. MEMBER OF U.P. TATE CEMENT CORPORATION LIMITED, DALLA, SON EB IADRA, P.F. CODE No. UP/4427
Year Rate of Intt. P.F. Opening Interest Closing Balance P.A. Contribution Balance Payble 97-98 12% 27423622 0 1096945 1096945 98-99 12% 26373953 28520567 526846 60163165 99-00 12% 0 60163165 7219580 67382745 00-01 11.25% 0 67382745 7580559 74963304 01-02 9.50% 0 74963304 7121514 82084848 02-03 9.50% 0 82084818 7798058 89882876 03-04 9.50% 0 89882876 8538873 98421749 04-05 9.50% 0 98421749 9350066 107771815 05-06 8.50% 0 107771815 9160604 116932419 06-07 8.50% 0 116932419 9939256 12687167 0
726123458 73074101 799197559
157. The calculating the rate of interest as given above on the opening balance of the PF contribution of Rs. 4, 43, 62, 622/-; closing balance as on 20.3.2007 conies to Rs. 147, 60, 95, 131/- for EPF Trust Churk, Sonebhadra PF Code UF 423 and on the, opening balance of Rs. 2, 74, 23622/- and closing balance as on 20.3.2006 comes to Rs. 79, 91, 97, 559/- in respect of EPF Trust Dal la, Sonebhadra PF Code UP/4427.
158. There is no dispute with regard to employer's contribution, administration charges and audit fees, which have been admitted in full amount to the PF Commissioner. The dispute only centres about penal interest under Section 7Q and damages under Section 14B of the EPF Act 1952.
159. The EPF rust Churk and Dalla were exempted trusts maintained by the company(in liquidation). The company was wound up on the recommend of BIFR on 9.12.1999 and appeal against the winding up order was dismissed. The company was suffering severe losses and closed its production since 1994. The wages were paid from the grants given by the State Government and thus the employer's contribution was not deposited in the trust. Thereafter the possession of the unit was taken over by the Official Liquidator in July 2001 and process of sale continued upto November 2006. Section 7Q of the EPF Trust 1952 provides that the employer shall be liable to pay simple interest @ 12% per annum and at such higher rate as may be J specified in the scheme and any amount due from him under the Act from the date it becomes due is provided higher rate of interest specified in the scheme shall not exceed to lending rate of interest charged by any scheduled bank. Section 14B of EPF Act 1952 provides for recovery of damages on the employer making default in making contribution to the fund. For this purpose a notice has to be given, to the employer and opportunity of hearing has to be given before levying and recovering damages. Section 17(1-A)(a) provides that where exemption has been granted to any establishment under Clause 17-A(a) the provisions of Section 6, 7A, 8 and 14B shall, so far as may be, apply to the employer of the exempted establishment in addition such other conditions as may be specified in the notification granting such exemption and where the4 employer contravenes, or makes default complying with any of the said provides, or conditions or any other provision this Act, he shall be punishable under Section 14 as if the said stablishment has not been exempted under the said Cause (a).
160. Shri Dhananjai Awasthi submits that as soon as default was made, the exemption will be deemed to be withdrawn and that the statutory liability under Section 7Q and 14B will automatically come into play.
161. I do not find any good ground to accept the prayer of payment of penal interest and damages under Section 7Q and 14B of EPF Act 1952. Section 7Q of the EPF Act 1952 is a penal provision applicable where the employer makes default on any amount due under the scheme from the date when the amount becomes due at the rate of 12% per annum or as such hi-her rate as is being specified in the scheme, which shall not exceed lending rate of interest charged by the scheduled bank. Firstly the scheme does not provide for payment of any such interest and secondly in the present case the default was not intentional. Although the Official Liquidator steps in shows of the employer where the industry stooped production and cannot be rehabilitated and has to be wound up. The question of payment of penal interest does not arise. Section 7Q is as such clearly inapplicable and in any case the rate of 12% interest from the date when the amount fall due cannot 1 be awarded out of sale proceeds. This amount will not be paid to they workmen to be part of Section 529, and to be made part of the wages to be paid IO the workmen under Section 529(3)(b) of the companies Act 1956. The court as such cannot allow the amount realized from the assets to be distributed in accordance with the Section 529A to be included in wages of the workmen.
162. The object and purpose of damages under Section 14B were considered by Supreme Court in AIR 1998 SC 688. The vires of Section 14B was upheld on the ground that it provides a show cause notice and a reasoned order after following principle of natural justice and giving a reasonable opportunity of hearing (para 28) before the damages can be levied. This Court in the Northern India Press Works v. Regional provident Fund Commissioner 1983 LAB I.C. 1314, the Delhi High Court in Atlantic Engineering Services (P) Ltd. N. Delhi v. Union of India and Anr. 1979 LAB. I.C. 695 & Supreme Court in Organo Chemical Industries and Anr. v. Union of India and Ors. AIR 1979 SC 1803 held that though there is no limitation of power under Section 14B for levying of the damages is to be exercised by giving opportunity of hearing to the concerned party. Same view was taken in Regional Provident Fund Commissioner U.P. v. Allahabad Canning Co. Bamrauli Allahabad 1978 LAB I.C. 998 and Kerela High Court in Calicut Modern Spinning & weaving Mills Ltd. 1982 LB I.C. 1422.
163. In the resent case the employer was not at fault in failing to deposit as there was no production nor there was any special grants given by the State Government. The trusts were managed by the company and not by EPF Commissioner. The trusts were managed by the company and not by EPF Commissioner. There was no notice given to the management or the Official Liquidator nor any proceedings were taken or any reasoned order passed to impose damages under Section 14B of the EPF Vet, 1951. The claim of the Provident Fund Commissioner as such under Section 7Q and Section 14B of EPF Act, 1952 is rejected. The amount claimed towards employer's contribution and administrative expenses including audit fee is held to be admissible and has been so admitted to proof by the Official Liquidator.
Appeal No. 8574 of 2007 (O-57) filed by C-14 Jai Ram Sharma and 11 others.
164. Heard Shri K.C. Vishwakarma for the 12 applicants. The applicant Nos. 1 to 11 are claiming to be working even after the date of winding up for supplying electricity to Cement Factory Colony Chunar and Jamohar Water Pump. The applicant No. 11 himself to be Executive Engineer and appears to have certified that the applicant Nos. 1 to 10 have worked regularly. The application was forwarded by the Sub Divisional Magistrate, Chunar to the Official Liquidator. The applicant No. 12 is the Churk Adhikari Kalyan Samiti.
165. Shri K.C. Vishwakarma submits that Sub Divisional Magistrate has verified that the applicant Nos. 1 to 11 have worked for supplying electricity to the residential colonies of the company at Chunar.
166. All the workmen engaged in maintaining supply of water and electricity had approached the Court in the year 2001-02 and were given specific orders to continue to work to maintain the water and electricity supplies and that a provision was made to pay Rs. 1000/- per month by way of interim measure. These applicants were not included in that group and that they have not been receiving the benefit of Rs. 1000/- per month. The Court therefore, has doubt over their working as they were never claimed may amount for maintaining water and electricity supplies from 1999 to 2006.
167. Shri Yogendra Singh, who claims himself to be Executive Engineer in 2001 also has not submitted any proof and was never authorised by the Official Liquidator or the Court to function as such the claims of these workmen and Shri Yogendra Singh for payment after the date of winding up are as such rejected. For the period before the date of winding up they will not be cow red by the decisions taken with regard to other workmen and employees.
168. Shri Viswakarma then submitted that the officers, who were not working in supervisory capacity and are to be treated workmen, are also entitled to be CCI scales, they were given to them in 1979 and 1986 and approved to be implemented for further revision w.e.f. 1.4.1996. He has relied upon a letter dated 11.8.1998 sent by the Senior Personnel Officer, Headquarters, U.P. State Cement Corporation Ltd. (in liquidation) for implementing the Cement Corporation of India's pay scale w.e.f. 1.4.1996. The consequential orders were not passed and that on the date of winding up they were not receiving the wages in terms of the CCI pay scales.
169. These officers were receiving central dearness allowances. They are claiming Industrial Dearness Allowance, for which they have not shown any entitlement and implementation. The claims for IDAR arc also not applicable and are rejected.
170. There are many categories of workmen, who are claiming entitlement of higher wages. The Court is not required to adjudicate whether they were entitled to such wages and will rely last wages drawn by the claimants. Wherever the Wage Board Award and CCI scales were not implemented, the workmen/employees will not be entitled to the same. The appeal/objection is disposed of accordingly.
Appeal No. 11527 of 2007 (O-59) filed by Harish Chandra Mishra and 7 Ors.
170. The claims of these workmen will be considered in accordance with the general directions given for calculating the wages. These workmen have claimed that they were looking after the water and electricity supply. They however, have not furnished any proof for the same. They had not approached earlier to the Court and are not workmen who are directed to continue to work either by the Official Liquidator or the Court. The payment, from the liquidation expenses will be made only to those workmen, who aim, permitted by the Official Liquidator or the Court to continue to work to supply water and electricity to the colonies.
Appeal No. 14012 of 2007 (O-66) filed by Ram Bali Singh and 05 Ors.
171. The claim of these applicants, who were working as workmen at Chunar Cement Factory Colony for supply of water and electricity were allowed to continue and the payment of Rs. 1000/- on an interim basis half be governed for the date prior to the date of winding up by the orders passed as above for all the workmen and for a period after the winding up, they will be paid Rs. 3000/- per month for skilled workmen and Rs. 2000/- per month for unskilled workmen after making deduction the amount already made to them by the Official Liquidator.
Appeal No. 37580 of 2007 (O-63) filed by Yogendra Kumar Mathur and three Ors.
172. The claims/objections of these workmen are covered by the general direction issued in this order. The Official Liquidator will calculate their claim accordingly.
Appeal No. 14009 of 2007 (O-65) filed by Chhavi Nath S/o Late Mangaroo, resident of Village-Bakiabad, Post Chunar, District Mirzapur.
173. The applicant has claimed arrears on the basis of Labour Court Award passed by H.M. Misra, dated 27.3.1985 in Adjudication Case No. 19 of 1984 by which it was held that his services were wrongly terminated on 23.6.1980.
174. The Court has already accepted all the awards under the Industrial Dispute, Act and adjudications by the Labour Court. The Official Liquidator will consider his implication accordingly.
Appeal No. 14014 of 2007 (O-67) filed by Haridas son of Dukhi Seth Resident of Qtr No. SF-1/1/50 Chunar Cement Factory Colony Post Chunar District Mirzapur.
175. The applicant has claimed arrears on the basis of Labour Court Award passed by H.M. Misra, dated 27.3.1985 in Adjudication Case No. 19 of 1984 by which it was held that his services were wrongly terminated on 23.6.1980.
176. The Court has already accepted all the awards under the Industrial Disputes Act and adjudications by the Labour Court. The Official Liquidator will consider his application accordingly.
Appea No. 15367 of 2007 (O-69) filed by Nand Kumar Mehta and 103 Ors.
177. The workmen of Dalla, Sonbhadra are covered by Award in Adjudication case No. 9 of 1984 decided by H.M. Misra, Presiding Officer, Industrial Tribunal-I UP Allahabad dated 22.1.1985 by which it was held that these workmen were entitled to regularisation. The matter has been dealt with and that all Labour Court awards and adjudications have been accepted to be considered and award by the Official Liquidator. The appeal is disposed of accordingly.
Appeal No. 16S92 & 16897 of 2007 (O-72) filed by Ramesh Kumar Singh, Proprietor, Vidyaman Cement Agency, Jamui Chatti, Chunar, Mirzapur.
178. The applicant is proprietor of M/s Vidyaman Cement Agency and was an agent of the Company (in liquidation). He deposited Rs. 10,000/- as security and claimed Rs. 25,000/- which has been accepted partly for Rs. 10,000/ the principal amount deposited by him.
179. The rejected part of the claim will fall in the category ot unsecured creditors. Alter excluding liquidation expenses and payment 10 secured creditors and workmen under Section 529 and 529A on pari passu basis, nothing will be left for payment to unsecured creditor. The appeals are accordingly rejected.
Appeal No. 18040 of 2007 filed by Smt. Dulari Devi and 8 Ors. And Appeal No. 18651 of 2007 filed by Radhey Lal and 21 Ors.
180. These appeals/objections have been filed by Smt. Dulari Devi and 8 others, non-teaching staff of Primary School, Sectors A, B, C, D, Dala, Sonbhadra and Radhey Lal and 21 others. In appeal No. 18651 of 2007, the application No. 1 is Principal applicant Nos. 2 to 17 are Assistant Teachers and 10 to 22 are peon of Cement Factory Primary Pathshala Churk Sonbhadra. These primary teachers were allowed to continue to serve to primary schools or teaching to children of the Cement Factory Colonies. The orders were passed to allow them to continue to serve. They however were not paid salary. It has been decided as above that their services were essential for preservation of the assets and also to serve the fundamental rights of the children of the residents of the colonies. The Principal as such will be paid at he rate on which the Supervisory staff will be paid i.e. Rs. 5000/- per month from the date of winding up to the date of declaration of final dividend : the teachers will be paid as skilled employees and peon as unskilled employees at the rate of Rs. 3000/ and Rs. 2000- per month respectively. For the period prior to the date of winding up they will be paid wages in accordance with the wages, which they were received. The applications are accordingly disposed of.
Appeal/Objection No. 47487 of 2007 (O-91) filed on behalf of Awadesh Pratap Singh and 8 Ors.
181. Heard Sri O.P. Singh, learned Counsel for the appellant/objectors. By this application, Shri Awadhesh Pratap Singh and 8 others, the Principal and Teachers of Junior High School Ghurma and Cement Factory Inter College Ghurma, district Sonbhadra, established and run by the company (in liquidation), have prayed to recall/modify the order dated 29.11.2006 by which the Court noticed that Jaiprakash Associate Ltd. the confirmed purchase the assets of the company (in liquidation) want to run the school through 'Jaiprakash Sewa Sansthan'. They however do not have any plan to disturb any school upto academic year 2006-07. It was thereafter observed in para 17 that let individual teachers apply for either transfer of their seruas or for adjustment of their services in any other state schools. They were also given liberty to negotiate with JAL, in case they are upto the standaids for retaining their services on fresh terms and conditions. The Court however was not inclined to give any protection order in the matter.
182. It is contended that the land namely plot No. 1329 area 12.375 acres was acquired by the State Government by notification dated 28.9.1979 under Section 4(1) read with Section 17(4) and Section 6 of the Act, for the purposes of establishing residential quarters and for school building for the workmen working in the mines of the U.P. State Cement Corporation Ltd. Churk (in liquidation) in Markundi (Ghurma). The copy of the khatauni certified by the Survey Tehsildar dated 11.12.2006, records a 'school' of Gurma Khadan-1. These documents go to show that the land was acquired for the Company (in liquidation) for school building and was entered as school in revenue records. The School however did not have any independent legal personality. It was established as Junior High School on 13.6.1979 and up graded as High School on 19.3.1980 and thereafter and Intermediate without any grant in aid on 4.3.1983. There was no society or trust constituted to establish an independent legal personality to claim the status independent from the Company (in liquidation).
183. The applicants have prayed a direction to the State of U.P.; District Inspector of Schools, the Administrator, U.P. State Cement Corporation Ltd. Inter College Ghurma, Sonbhadra; and Official Liquidator, U.P. to establish the applicants' college at its own level and not to change the nature of land, building of the college and the fund (in the form of Grant-in-Aid) to the applicants' college as well as to direct the respondents not to interfere in the functioning of the applicants w.e.f. 1.7.2007 onwards under the supervision of control of J AL and by any other private party.
184. Upon hearing Shri Ashok Mehta, appearing for Official Liquidator, I do not find that the Company Court has any such jurisdiction in liquidation proceedings to pass such orders. Once the assets have been sold, the sale was confirmed and part possession of the assets have been given to the purchaser, the arrangement to continue the school till the academic year was made with the consent of purchaser. The Court has no jurisdiction to pass any order either directing the State Government or the JAL to run the school with the grant-in-aid of the State Government. The application is accordingly rejected with liberty to the applicants to seek their remedies, if they have any, in accordance with the law, before the appropriate forum.
Appeal/Objection No. 16878 of 2007 (O-71) tiled on behalf of Hari Shanker Prasad and 26 Ors. and Appeal/Objection No. 19922 of 2007 filed on behalf of Paras Nath Singh and 15 Ors.
185. There two appeals/objections filed by Shri Hari Shanker Prasad and 26 others and Paras Nath Singh and 15 others claiming to be workmen looking after watch and ward of the Chunar Cement Factory Colony, P.S. Chunar, District Mirzapur. They have been treated by Official Liquidator as workmen upto the date of winding up of the company (in liquidation) i.e. Upto 9.12.1999. These workmen have now claimed salary from 10.12.1999 to 27.7.2001 on the ground that they had been working as security guards/watch and ward under the supervision of Senior Security Officer. 169. The Official Liquidator took possession of the assets under the orders of the Court on 27.7.2001. On the date of winding up their services were dispensed with under Section 445(3) of the Companies Act 1956.
186. Their claim is in two parts (a) wages, retrenchment compensation, bonus, etc. as workmen upto date of winding up; and (b) salary from 10.12.1999 to 27.7.2001 under the supervision of the Senior Security Officer of the Company (in liquidation).
187. So far first part of the claim is concerned, the applicants are entitled to the same relief as other workmen have been provided in the order. The claim of salary the second part from 10.12.1999 to 27.7.2001 cannot be accepted. The appellants did not work under the orders or in supervision of the Official Liquidator. The Official Liquidator did not allow them to be engaged as watch and ward staff after the date of winding up. They never approached the Court either by themselves or through their supervisors seeking permission of the Court having custody of the assets of the company (in liquidation) under Section 456 of the Companies Act 1956 to continue to work. The Senior Security Officer had no authority thereafter to deploy them or to verity their work and performance. Their claim in the second part is rejected and their appeals to that extent is dismissed.
188. It may be noticed that some of the claimants/objectors have not titled their representations against the report of the OL as Company Appeal under Rule 164 of the Company (Court) Rules of 1959. Most of these appeals were titled as company applications or objections. The court has tried to avoid the technicality and has treated all these applications/objections as company appeals and has decided all of such applications/objections/appeals. In some of the
applications/objections/appeals, the orders have been passed separately. In this judgment, the Court has considered the applications/objections/appeals of the secured creditors, UP Power Corporation, Employees Provident Fund Commissioner, UP Cement Vetanbhogi Sahkari Rin Samiti Ltd. and some of the appeals filed by the workmen.
189. In Order to clarify the OL is directed that all those workmen/employees, who were engaged either by the orders of the Court or otherwise for the purposes of maintenance of employees provident fund accounts, schools and colleges (other than those who are paid from the Government grant regularly) hospitals & dispensaries, water and electricity supplies, will be paid from out of liquidation expenses to the extent that the supervisory managerial category persons namely trustees of the two employees provident fund trusts, doctors, principals and the general manager, who were asked to look after the assets by an interim arrangement, as salary @ Rs. 5000/- per month. The other skilled employees including teachers, pharmacists, nurses and clerks (a Rs. 3000/- per month and all other workmen @ Rs. 2000/- per month (subject to deduction of Rs. 1000/- per month paid to the employees maintaining water and electricity upto date of declarantion of final dividend).
190. With this judgment, the Court has concluded the hearing on the objections appeals for admitting the 'proofs of debts', dismissed or allowed by the OL n part. All the applications/objections/appeals are consequently partly allowed except those, which have been rejected by the Court. The OL will proceed to recalculate the amount for distribution, taking into account the direction is given by the Court. He will first separate liquidation expenses and the amount for taxation and audit and then work out the overriding preferential claims and apply the pari passu rule under Section 529A. It is only, if some amount is left over and above the liquidation expenses then the preferential claimants will be entitled to the interest. The application/objections/appeals of the officers and unsecured creditors are according dismissed.
191. The OL will keep Rs. 4.59 crores i.e. one percent of the total sale consideration with him for a period of one year for any claim of the workmen or other category, left out by either inadvertence or which could not be filed on account of delay or other unforeseen circumstances. This amount shall be disbursed subject to the orders of the Supreme Court after the period of one year on pari passu basis between all the claimants in accordance with the judgment. The OL will also notify the summary of this judgment within two weeks in all leading news papers, having wide circulation in and around the districts Mirzapur and Sonebhadra for the benefit of he workmen, as well as the orders of the Supreme Court by which the disbursement has been stayed.
192. The OL is reminded that in RPJ Mineral Pvt. Ltd. and Anr. v. S.K. Saxena, Official Liquidator and Ors., Hon'ble Supreme Court, while hearing Special Leave Petition (Civil) No. 19132 of 2006, arising out of judgment dated 27.10.2006 in Civil Appeal No. 1239 of 2006 and the orders dated 20.9.2006, 5.6.2007 and 11.10.2006 in Misc. Company Application No. 4 of 1997, has passed an order on 9.2.2007 "no money will be disbursed during the pendency of the special leave petition." The Official Liquidator will comply with the orders of the Hon'ble Supreme Court. He may consider and adjudicate the claims/proofs of debts in tennis of this judgment but shall not disburse the amount during the pendency of the special leave petition in Supreme Court, and will comply with the orders of the Supreme Court, in this regard.

OFFCIAL LIQUIDATOR OF M/S U.P. STATE CEMENT CORP LTD Complaints - AMOUNT OF FUND NOT YET RECD.
OFFCIAL LIQUIDATOR OF M/S U.P. STATE CEMENT CORP LTD
Posted: 2008-10-08 by Sanjay Verma mailSend email


AMOUNT OF FUND NOT YET RECD.
SIR
MY P.F NO IS 423/4441 WITH THE SAID COMPANY SITUATED AT U.P.UNDER THE CONTROL OF U.P. GOVT.DESPITE OF SEVERAL REQUEST THE FUND HAS NOT BEEN PAID TO ME YET . IT IS PENDING FOR THE LAST 08 ( EIGHT )YEARS . THE MATTER IS PENDING WITH R.P.F.C.VARANASI(U.P.)KINDLY HELP ME TO GET MY DUES URGENTLY.

REGARDS

SANJAY VERMA
As reported at ptinews.com on 17 July, 2009

New Delhi, Jul 17 (PTI) The Chief Justice of India and the Supreme Court cannot be two distinct entities, the Central Information 
vbglossarlink Commission has held directing the registry of the apex court to provide information vbglossarlink to anRTI vbglossarlink applicant even if it is held by the office of the Chief Justice.

"The Institution and its head cannot be two distinct Public Authorities. They are one and the same. Information 
vbglossarlinktherefore available with Chief Justice of India must be deemed to be available with the Supreme Court of India," Chief Information vbglossarlink Commissioner Wajahat Habibuallah said.

The Commission was hearing the plea of RTI 
vbglossarlink applicant 77-year-old P K Dalmia who sought to know the fate of hiscomplaint vbglossarlink, filed with the Chief Justice of India, of alleged malpractices by a designated company judge Sunil Ambwani in the liquidation of UP State Cement Corporation Limited
As reported at on 12 August, 2009
http://www.indiainfoline.com/Markets/Company/Fundamentals/Management-Discussions/Jaiprakash-Associates-Ltd/532532

Jaiprakash Associates Ltd

BSE: 532532 | NSE: JPASSOCIAT | ISIN: INE455F01025
Market Cap: [Rs.Cr.] 32,273 | Face Value: [Rs.] 2 | Industry: Construction
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Management Discussions

Forming part of the Report of Directors for the year ended March 31, 2009
During the year, Chunar and Dalla cement plants owned by Uttar Pradesh State Cement Corporation Ltd. (In Liquidation) (UPSCCL) which were purchased by your Company through High Court, have commenced production. The comprehensive, repair, rehabilitation and modernization programme carried on by the Group has been successfully completed. 2 MTPA cement capacity with new kiln at Dalla, UP has been successfully commissioned along with captive power plant of 27 MW.