PRESI. SECY, J.K.SYNTS.MAZ.UN.,KOTA&ANR Vs ARFAT PETROCHEMICALS PVT.LTD .
Bench: ANIL R. DAVE,L. NAGESWARA RAO
Case number: C.A. No.-008597-008597 / 2010
Diary number: 3932 / 2010
Advocates: NILOFAR KHAN Vs
E. C. AGRAWALA
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NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 8597 of 2010
PRESIDENT/SECRETARY, J.K. SYNTHETICS MAZDOOR UNION (CITU), INDIRA GANDHI NAGAR, KOTA & ORS.
.... Appellant(s) Versus
ARFAT PETROCHEMICALS PVT. LTD. & ORS.
….Respondent(s) With
CIVIL APPEAL No. 8598 of 2010
GENERAL SECRETARY, RAJASTHAN TRADE UNION KENDRA & ANR.
.... Appellant(s) Versus
ARFAT PETROCHEMICALS PVT. LTD. & ORS.
….Respondent(s) With
CIVIL APPEAL No. 8599 of 2010
M/S J.K. SYNTHETICS LIMITED
.... Appellant(s) Versus
M/S ARFAT PETROCHEMICALS PVT. LTD. & ORS.
….Respondent(s)
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J U D G M E N T
L. NAGESWARA RAO, J.
Civil Appeal Nos. 8597 and 8598 of 2010 are filed by
President, J.K. Synthetics Mazdoor Union, Kota & Ors. and
General Secretary, Rajasthan Trade Union Kendra & Anr.
respectively against the judgment dated 28.07.2009 of the
Rajasthan High Court at Jaipur in Civil Writ Petition No.
2006 of 2009. Civil Appeal No. 8599 of 2010 is filed by M/s
J.K. Synthetics Ltd. against the same judgment to a limited
extent that the findings in its favour given by the Appellate
Authority for Industrial and Financial (AAIFR) vide order
dated 11.12.2008 were reversed without any challenge to
the same.
2. The parties will hereinafter be referred to as arrayed in
Civil Appeal No. 8597 of 2010. The facts relevant for
adjudication of the dispute in these Appeals are as follows: J.K. Synthetics Limited (now Jay Kay Enterprises Ltd.), who
is the Second Respondent was declared a sick industrial
company on 02.04.1998. The Industrial Development Board
of India (IDBI), who is the Fourth Respondent was
appointed as the Operating Agency. A Draft Rehabilitation 2
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Scheme was submitted on 06.06.2000. As per the said
Scheme, a revival of the cement units by de-merging them
into a separate unit was proposed. This was not accepted
by the creditors and the Operating Agency. The Board for
Industrial and Financial Reconstruction (BIFR) directed an
advertisement to be issued for a change of management of
the company for the purpose of rehabilitation. The Second
Respondent challenged the order dated 06.06.2000 by filing
an Appeal before the AAIFR. The AAIFR circulated a Draft
Rehabilitation Scheme for approval on 31.01.2001. The
AAIFR allowed the said Appeal by its order dated
23.01.2003 by setting aside the order of the BIFR dated
06.06.2000. By the said order, the AAIFR sanctioned the
Draft Rehabilitation Scheme dated 31.01.2001 by which the
proposal of the de-merger of cement units was accepted. 3. In the meanwhile, the Second Respondent entered into
a Memorandum of Understanding (MoU) with M/s Arafat
Petrochemicals Pvt. Ltd. (APPL), the First Respondent
herein. According to the said MoU the assets of the Kota
Units of Respondent No. 2 were to be sold to Respondent
No.1 for a total consideration of Rs. 15 crores. The liability
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towards payment to the workmen was to be borne by APPL.
It is also relevant to mention here that a Tri-Partite Labour
Settlement Agreement (TLSA) was executed between the
First Respondent, Second Respondent and the Labour
Unions on 09.10.2002. Another TLSA on the same terms
was entered into between the First Respondent, Second
Respondent and Staff Association on 22.10.2002. The total
liability under the TLSAs worked out to approximately
Rs.43.69 crores. There is no unanimity between the parties
on the scope of the above mentioned TLSAs. The First
Respondent claims that there is no compulsion on its part
to provide future employment to all the existing workmen
whereas the workmen contend to the contrary. There is
also a dispute about the obligation of First Respondent to
revive the Kota units. 4. On 07.01.2005, the AAIFR sanctioned a Scheme for
transfer of the Kota units to the First Respondent in terms
of the MoU dated 19.10.2001. The liability of the First
Respondent was fixed at Rs.52.46 crores (Rs.15 crores to be
paid to JK Synthetics Limited/Second Respondent and
Rs.37.46 crores to be paid to the workmen). The order
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dated 07.01.2005 was challenged by the Appellant in the
High Court of Delhi by filing a Writ Petition which was
dismissed on 26.07.2005. The AAIFR refused to interfere
with the Sanctioned Scheme dated 07.01.2005 on the
ground that it was substantially implemented. By an order
dated 30.05.2007 the AAIFR directed the BIFR to monitor
the implementation of the Sanctioned Scheme. 5. The Appellant filed Civil Suit No.63 of 2008 in the
Court of Additional Civil Judge, Kota seeking an injunction
against the First Respondent from selling, removing or
dismantling any assets of the Kota units till the entire
amount due to the workmen was determined and settled.
The said suit was dismissed on 08.04.2008 on the ground
that the matter has to be decided under the Industrial
Disputes Act, 1947. 6. On 24.03.2008 a sale deed was executed by the
Second Respondent in favour of the First Respondent for
sale of the assets of the Kota units. In the review meeting
held on 05.05.2008, the BIFR took note of the complaints
that were made regarding the sale of assets of the Kota
units as waste/scrap by the First Respondent. The BIFR
held that the interest of the workmen have to be
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safeguarded in accordance with the Sanctioned Scheme of
2005. The BIFR also held that the Second Respondent
cannot escape responsibility towards the rehabilitation of
the Kota unit on the ground that there is change in
management. After holding that sufficient steps have not
been taken by the First and Second Respondents towards
revival of the Kota Units, the BIFR gave the following
directions: i) “IDBI (MA) would expeditiously carry out spot
inspection of the Kota Unit and submit a detailed
status report to this Board regarding implementation
of the SS-03 & SS-05 within a period of 30 days. ii) M/s JKSL/M/s APPL would maintain status quo and
would not alienate any material/assets whatsoever
from the factory site of Kota Unit till further orders
from this Board. iii) Permission is granted to all Association (s)/Union (s)/
Employees of the company M/s JKSL present today
to proceed u/s 22(1) against the company M/s
JKSL/M/s APPL/their promoter(s)/guarantor (s) for
recovery of their dues through legal action(s) in
appropriate forum(s). iv) Chief Secretary/ Resident Commissioner, Govt. of
Rajasthan shall attend the next hearing as fixed by
this Board. v) Allahabad Bank, Central Bank of India and
Syndicate Bank are exempted from attending any
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further hearing in the matter. The address list be
amended accordingly, as requested by the company.
The employees and other respondents listed by
Hon’ble AAIFR in order of 31.08.2006 be noticed for
the next hearing.” 7. The First Respondent participated in the next review
meeting held by the BIFR on 30.06.2008. It complained of
no notice being issued for the earlier meeting dated
05.05.2008. The First Respondent informed the BIFR that
it is not a sick company and no directions can therefore be
issued to it. The BIFR held that the First Respondent was
not right in contending that it does not fall within the
purview of the Sick Industrial Companies (Special
Provisions) Act, 1985 (hereinafter referred to as “the Act’’)
and need not implement the orders issued by the Board.
The BIFR directed the IDBI to carry out an inspection of the
Kota units and to submit a report. There was a direction to
maintain status quo in respect of the material/assets at the
factory site of the Kota Units till further orders. There was
also a stay on transfer/alienation of land or assets of the
company without the permission of the Board. The orders
dated 05.05.2008 and 30.06.2008 of the BIFR were assailed
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by the First and Second Respondents before the AAIFR.
The AAIFR by its order dated 11.12.2008 dismissed the
Appeals filed by the First Respondent and directed the BIFR
to re-examine the exact position relating to the payment of
dues to the workmen. The BIFR was also directed to
continue the monitoring of the Scheme and review the
efforts made by the First Respondent towards revival of the
Kota units. The contention of the First Respondent that the
BIFR has no jurisdiction over a company which is not a sick
company was rejected. It is relevant to refer to the findings
of the AAIFR in favour of the Second Respondent in
paragraphs 38, 39 and 40 of the said order. In the said
paragraphs the AAIFR held that it is only the First
Respondent who would be responsible for the payment of
the dues to the workmen. While holding that the Second
Respondent is not liable to make any payment, the AAIFR
allowed the Appeal of the Second Respondent by setting
aside the directions issued by the BIFR to the Second
Respondent. 8. Aggrieved by the order dated 11.12.2008 of the AAIFR,
the First Respondent filed a Writ Petition in the Rajasthan
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High Court. The High Court allowed the Writ Petition by
holding that the BIFR and the AAIFR do not have
jurisdiction to issue directions to a company which is not a
sick industrial company under Section 22 A of the Act.
Being aggrieved by the said judgment of the High Court, the
Labour Unions filed Civil Appeal No. 8597 and 8598 of
2010. Civil Appeal No. 8599 of 2010 is filed by JK
Synthetics Limited aggrieved by the judgment in so far as it
set aside the findings in its favour which were not
challenged in the Writ Petition. 9. The only point that falls for consideration in these
Appeals is regarding the scope of Section 22 A of the Act.
Section 22 A is as follows: “22 A. Direction not to dispose of assets: - The Board may, if it is of opinion that any direction is
necessary in the interest of the sick industrial company
or creditors or shareholders or in the public interest, by
order in writing direct the sick industrial company not to
dispose of, except with the consent of the Board, any of
its assets— (a) during the period of preparation or consideration
of the scheme under section 18; and (b) during the period beginning with the recording of
opinion by the Board for winding up of the
company under sub-section (1) of section 20 and
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up to commencement of the proceedings relating
to the winding up before the concerned High
Court.” 10. “Sick industrial company” is defined in Section 3 (1) (o)
which is as under: “(o) "sick industrial company" means an industrial
company (being a company registered for not less than
five years) which has at the end of any financial year
accumulated losses equal to or exceeding its entire net
worth. Explanation: - For the removal of doubts, it is hereby
declared that an industrial company existing
immediately before the commencement of the Sick
Industrial Companies (Special Provisions) Amendment
Act, 1993, registered for not less than five years and
having at the end of any financial year accumulated
losses equal to or exceeding its entire net worth, shall be
deemed to be a sick industrial company;” 11. It is clear from a plain reading of Section 22 A of the
Act that the Board can issue a direction not to dispose of
assets only to a sick industrial company. There is no
dispute that the First Respondent is not a sick industrial
company and that it purchased the assets from a sick
industrial company in accordance with the Sanctioned
Scheme. The BIFR was not correct in passing an order of
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status quo and directing the First Respondent not to
alienate/transfer the assets by its orders dated 05.05.2008
and 30.06.2008. We agree with the findings of the High
Court in the impugned judgment that the BIFR does not
have competence to issue directions to a company which is
not a sick industrial company under Section 22 A of the
Act. We are fortified in this view by a judgment of this
Court in U.P. State Sugar Corporation Ltd. v. U.P. State
Sugar Corporation Karamchari Association and Anr.
reported in (1995) 4 SCC 276 wherein it was held as
follows: “It runs counter to the express terms of Section 22 A
of the Act which confers a limited power on the
Board to pass an order prohibiting a sick industrial
company from disposing of its assets only during
the period specified in Clause (a) and (b).”
12. Several contentions have been raised by both sides
during the course of hearing of these Appeals which we
have not adverted to as they are not relevant for
adjudication of the dispute in these appeals. We express no
opinion on the jurisdiction of BIFR under other provisions
of the Act. It is open to the BIFR to review the
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implementation of the Sanctioned Scheme and pass
suitable directions. 13. As stated supra, the AAIFR held that the Second
Respondent has no liability in respect of Kota units which
have been sold to the First Respondent. The said findings
were not challenged by the First Respondent in the Writ
Petition filed in the High Court. The High Court set aside
the entire order dated 11.12.2008 without taking note of the
findings in favour of the Second Respondent. The petition
filed for clarification by the Second Respondent was also
dismissed by the High Court. The High Court ought not to
have disturbed the findings in favour of the Second
Respondent as they were not in challenge in the Writ
Petition filed by the First Respondent. 14. For the aforesaid reasons, Civil Appeal Nos. 8597 and
8598 of 2010 are dismissed. Civil Appeal No. 8599 of 2010
is allowed. No costs.
.…............................J. [ANIL R. DAVE]
................................J. [L. NAGESWARA RAO]
New Delhi, November 18, 2016
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