M/S Steel Authority Of India Ltd. ... vs Union Of India Thru Under Secy. ...

Oral

1. Heard Sri Prashant Chandra, learned Senior Counsel assisted by Smt. Shraddha Agarwal for the petitioner - M/S Steel Authority of India Ltd. Jagdishpur, Sultanpur and Sri Ausaf Ahmad Khan assisted by Sri Sunil Kumar Singh appearing for the opposite party no. 3 - Joint Action Committee, Industrial Area Jagdishpur, the workmen's union of erstwhile M/S Malvika Steels which was running a factory in Industrial Area, Jagdishpur, District Sultanpur.

2. The petitioner has approached this Court challenging the order dated 22.5.2014 passed by the Under Secretary, Ministry of Labour, Central Secretariat, New Delhi wherein a Reference under Section 10(1) of the Industrial Disputes Act of 1947 has been made to the Central Government, Industrial Tribunal-cum-Labour Court, Lucknow with respect to the dues of the workmen which allegedly had not been paid and with respect to orders terminating their services by their erstwhile employer M/S Malvika Steels.

3. It has been submitted by the learned Senior Counsel that from a perusal of the Reference order impugned, it is apparent that the General Manager, Steel Authority of India Ltd., Industrial Area, Jagdishpur has been forwarded a copy of the Reference for necessary action, along with the workmen and the Presiding officer, CGIT-Cum-Labour Court, Aliganj perhaps a representation was filed which was referred to the Conciliation Officer and on basis of a report submitted by the Conciliation Officer to the Central Government the impugned Reference Order has been passed. The petitioner had earlier appeared before the Conciliation Officer and took a specific plea that they had purchased only the land and building along with plant and equipment and other fixed assets of M/S Malvika Steels Limited, Industrial Area, Jagdishpur, Sultanpur and had not taken over the liabilities of the erstwhile employers.

4. It has been submitted by the learned Senior Counsel that the dues of the workmen which may have been outstanding against Malvika Steels are recoverable from the IFCI which was given all the sale proceeds in satisfaction of its debts in pursuance of an order passed by the DRT Delhi in OA No. 145 of 2002, affirmed by the Delhi High Court thereafter.

5. Learned counsel for the petitioner has referred to the Annexure no. 4 to the writ petition which is a Certificate of Sale of Immovable Property issued under Rule 65 of the IInd Schedule to the Income Tax Act, read with Sections 25 and 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It mentions clearly that it has been issued by the office of the Recovery Officer, DRT-1 Delhi in Recovery Case No. 121 of 2005 (OA No. 145 of 2002) (IFCI Vs. M/S/ Malvika Steels Limited). It specifies the property in question which is of 739.65 acres along with building, plant, equipment and other fixed assets of M/S Malvika Steels having been purchased in Auction Sale for recovery of dues payable by Malvika Steels to IFCI and other creditors and in compliance of an order passed by the High Court of Delhi on 25.2.2009.

6. It has been submitted by the learned Senior Counsel that the Industrial Disputes Act, 1947 is a General Act whereas the proceedings which were undertaken for sale of property of Malvika Steels were under a Special Act, namely the Act of 1993 and the petitioners are only the auction purchasers. They cannot be saddled with the liability of payment of dues of the workmen. If the workmen had any dues, they should approach the Official Liquidator as has been observed by the Hon'ble Supreme Court in judgment rendered in Bank of Maharashtra Vs. Pandurang Keshav Gorwardkar & others 2013 (7) SCC 754.

7. Learned Senior Counsel has read paragraphs 67.11, 67.12 and 68 of the said judgment which are being quoted herein below:-

"67.11. Section 19(19) of the 1993 Act does not clothe DRT with jurisdiction to determine the workmen's claim against the debtor company. The adjudication of workmen's dues against the debtor company in liquidation has to be made by the liquidator. In other words, once the company is in winding up the only competent authority to determine the workmen's dues is the liquidator who abviously has to act under the supervision of the Company Court and by no other authority.

67.12. Section 19(19) is attracted only where a debtor company is in winding up or a provisional liquidator has been appointed in respect of such company. If the debtor company is not in liquidator or if in respect of such company no order of appointment of provisional liquidator has been made and merely winding up proceedings are pending, the question of distribution of sale proceeds among secured creditors in the manner prescribed in Section 19(19) of the 1993 Act does not arise.

68. For the above conclusions, we hold, as it must be held that the claims of the workmen who claim to be entitled to payment pari passu have to be considered and adjudicated by the liquidator of the debtor company and not by DRT. We answer the question accordingly."

8. It has been submitted on the basis of observations made by the Hon'ble Supreme Court that in case the workmen had any dues, they should have approached the Official Liquidator in accordance with the provisions contained in 1993 Act or even under Sections 589(A) read with Sections 591(1) of the Companies Act, 1956. The Reference made by the Central Government is wholly inappropriate and without jurisdiction, and therefore the same has been challenged before this Court.

9. Learned counsel for the respondent no. 3, Sri Ausaf Ahmad Khan assisted by Sri Sunil Kumar Singh has on the other hand referred to Section 2(k) of the Industrial Disputes Act, 1947 which relates to an "industrial dispute" and the meaning thereof and what shall be termed as an industrial dispute. He has also referred to Section 2(l) of the Act which relates to "lock out", and Section 2(oo) of the Act which relates to "retrenchment".

10. It has been submitted on the basis of Sections 325 to 327 of the Companies Act that the workmen's dues are the first charge on the Company, and in case such dues are outstanding, then they had to be satisfied before any other secured creditor or unsecured creditor is given the sale proceeds in case of winding up of the Company.

11. Learned counsel for the respondent no. 3 has also referred to and read out in detail, Section 10 of the Act to say that the Reference has been rightly made by the Central Government to the CGIT, Lucknow.

12. It has been submitted further that this writ petition is not maintainable against a Reference order alone for which the learned counsel for the respondents has placed reliance upon a judgment rendered in Sadhu Ram Vs. Delhi Transport Corporation AIR 1994 SC 1467. It has been submitted by the learned counsel for the respondents that just as the petitioners had filed their reply before the Conciliation Officer on 5.3.2012 and 16.4.2012, they should have also filed their written statement before the CGIT which would have decided whether the respondent no. 3 was aggrieved by the action of its erstwhile employers or by the action of the petitioner.

13. Learned counsel for the petitioner in rejoinder has submitted that the petitioner cannot be harassed by unnecessary Reference made without jurisdiction by the Central Government. Unnecessary litigation should have been avoided and the Central Government should have directed the respondent no. 3 to approach the Official Liquidator.

14. Having considered the rival contentions, this Court finds that the judgment relied upon by the learned counsel for the respondent no. 3 Sadhu Ram (supra) turns on completely different facts altogether. Sadhu Ram was a probationer bus conductor whose services were terminated by the Delhi Transport Corporation. He had approached the Conciliation Officer who made a report to the Delhi Administration wherein the Delhi Administration found an industrial dispute in existence with regard to termination of service of Sadhu Ram, and referred the dispute to the Presiding Officer, Labour Court,Delhi for adjudication. The Presiding Officer, Labour Court passed an Award in favour of the workmen and directed for reinstatement w.e.f. 1.9.1967 with full back wages and other benefits.

15. The Management of Delhi Transport Corporation thereafter filed writ petition before the Delhi High Court, which writ petition was entertained by the learned Single Judge on the question that the workmen had himself not raised any demand with the Management, and therefore there was no "industrial dispute" within the definition of the Act. The decision of the learned Single Judge was affirmed by the Division Bench.

16. The workmen therefore came before the Supreme Court. The Supreme Court observed that the High Court should not have undertaken a detailed exercise into finding out the "jurisdictional fact" with regard to entertainment of the Industrial Dispute, and it could not have acted as an Appellate Tribunal with reference to findings of fact recorded by the Industrial Tribunal. It referred to the Tribunal deriving its jurisdiction out of the Reference made on failure of conciliation proceedings by the Government.

17. The Supreme Court also referred to another judgment rendered by it in Sindhu Resettlement Corporation Limited Vs. Industrial Tribunal of Gujrat 1968 (1) SCR 515, on which the High Court had relied to allow the writ petition of the Management, to say that in the aforesaid judgment, the Supreme Court had only referred to the fact that the Reference was with respect to wrongful termination, and not with respect to reinstatement and payment of dues arising out of such wrongful termination.

18. This Court has also carefully perused the Sections referred to herein above by the learned counsel for the respondent no. 3 and finds that they relate to an ordinary industrial dispute between an employer and workmen. It does not refer to a dispute of the nature as is evident from the facts of this case.

19. It has been pointed out by the learned counsel for the petitioner that initially when an auction notice was published by the Recovery Officer, the reserved price for the land and other fixed assets of Malvika Steels had been determined by the Recovery Officer, DRT-1 Delhi as only Rs. 19,458.99/- lakhs. In the said notice, reference has been made at serial no. 2 of the endorsement that it included Employees Claim of Rs. Thirteen crores and odd. In the second revised notice for public auction of property, the reserved price rose to Rs. 207 crores because certain other dues which had been left out by the Recovery Officer with respect to the Malvika Steels, also were computed. The petitioner had bought the property of Malvika Steels for Rs. 209 crores in a public auction.

20. This Court has also perused the judgment rendered by the Supreme Court in Bank of Maharashtra (supra) relied upon by the learned Senior Counsel for the petitioner. In the aforesaid judgment, the Supreme Court considered the question whether the Debts Recovery Tribunal was empowered to adjudicate / determine the dues of the workmen on the Debtor Company. It answered the question that under the DRT, participation of workmen along with secured creditors under Section 19(19) of the Act of 1993 is only to a limited extent, in the distribution of sale proceeds by the DRT, and not for adjudication / determination of their claims against the Debtor Company. Once a Company is inwinding up proceedings, the only competent Authority to determine the workmen's dues and quantify the workmen's portion of the sale proceeds is the Liquidator, under supervision of the Company Court and no other Authority.

21. In Haryana State Electricity Board Vs. Hanuman Rice Mills, Dhanauri & others 2010 (9) SCC 145 which related to recovery of electricity dues and their demand from the current occupier of the premises, the Supreme Court observed that the contract of sale contains the conditions of such sale. A third party obligation unless mentioned in such contract of sale, cannot be fastened on a purchaser. A third party like an auction purchaser, who is not connected with the previous owner / occupier cannot be saddled with the liability of the previous owners / occupiers, in the absence of any agreement between the auction purchaser and parties to the sale contract.

22. Similar views were expressed by the Hon'ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. DVS Steels & Alloys Private Limited 2009 (1) SCC 210 where the Supreme Court observed that in case the electricity supplier has certain dues against the predecessor in title or possession, of the property sold in auction, such dues cannot be recovered from the auction purchaser as there is no Privity of Contract. Only if the purchaser had agreed to deposit the dues of his predecessor on pro-rata basis in the contract of sale, can the purchaser be settled with such responsibilities and shall be estopped from claiming otherwise. For the aforesaid observations, the Supreme Court had relied upon Isha Marbels Vs. Bihar Electricity Board 1995 (2) SCC 648.

23. This Court finds from a perusal of the documents filed along with the writ petition that an Original Application was filed by the IFCI before the DRT, which led to the Recovery Case No. 121 of 2005 being filed thereafter. The matter perhaps was also adjudicated by the High Court of Delhi with regard to such dues. An order passed on 25.2.2009 in pursuance of which the sale of the property of M/S Malvika Steels Limited was conducted through Public Auction and the Sale Certificate issued thereafter under Sections 25 and 29 of the Act of 1993.

24. A Constitution Bench of the Supreme Court in Bombay Vs. K.P. Krishnan AIR 1960 SC 1223 has observed that the appropriate Government while considering whether or not to make a Reference is not precluded from considering the matter beyond the report under Section 12(5) in coming to a conclusion as to whether a case for reference has been made on merits and if on such prima-facie examination the Government comes to a conclusion that no case is made out, it may refused to make the reference. The relevant extract of the judgment rendered by the Supreme Court is being quoted herein below:-

"------------ The problem which the Government has to consider while acting under Section 12(5) (a) is whether there is a case for reference. This expression means that Government must first consider whether a prima facie case for reference has been made on the merits. If the Government comes to the conclusion that a prima facie case for reference has been made then it would be open to the Government also to consider whether there are any other relevant or material facts which would justify its refusal to make a reference. The question as to whether a case for reference has been made out can be answered in the light of all the relevant circumstances which would have a bearing on the merits of the case as well as on the incidental question as to whether a reference should nevertheless be made or not. A discretion to consider all relevant facts which is conferred on the Government by Section 10(1) could be exercised by the Government even in dealing with cases under Section 12(5) provided of course the said discretion is exercised bona fide, its final decision is based on a consideration of relevant facts and circumstances, and the second part of under Section 12(5) is complied with--------."

(emphasis supplied)

25. Although, the Government should not try to reach a final decision on the question of law and fact, the Government while taking decision on making or not making reference is not precluded from considering prima-facie the merits of the dispute and from taking other relevant considerations into account.

26. In Bombay Union of Vs. State of Bombay of journalists (AIR 1964 SC 1617), the Supreme Court observed that where a claim is patently frivolous or clearly beleted or in any way barred by any other law for the time being in force, the Government may refuse to make a reference.

27. Such view taken by the Supreme Court had been followed in Ram Autar Sharma Vs. State of Haryana 1985 (3) SCC 189. such view has also been taken in.

28. The law on the point has been settled now by the Hon'ble Supreme Court in Indian Tea Association Vs. Ajeet Kumar Baroad 2000 (3) SCC 93 and in Rashtriya Chemical and Fertiliser Limited Vs. General Employees Association 2007 (5) SCC 272 where the Supreme Court has observed that appropriate Government may not be justified in making a reference under Section 10 of the Act without being satisfied on the facts and circumstances brought to notice that an industrial dispute is in existence or is apprehended, and if such a Reference is made, it is desirable wherever possible for the Government to indicate the nature of the dispute in the order of the reference. The order of the reference under Section 10 is an administrative act and not a quasi judicial act, yet the Courts can examine the reference order closely to see whether there was infact any material before the Government to support its conclusion. The order made by the appropriate Government under Section 10 of the Act being an administrative order, no lis is involved, as such the order is made on the subjective satisfaction of the Government. If it appears that appropriate Government has not applied its mind properly and there is no subjective satisfaction in the facts of the case, the Courts can interfere in such an order of Reference and for coming to such conclusion, the Court can look into the fact whether what was referred by the Government was not an industrial dispute (within the meaning of the Act).

29. There was no question on which a Reference could have been made by the respondent no. 1 to the respondent no. 2. If the respondent no. 3 was aggrieved by action or inaction on the part of the M/S Malvika Steels, it should have approached the Official Liquidator.

30. Learned counsel for the respondent no. 3 has submitted that the workmen are not supposed to know the remedy available under the Act. They had filed their grievance in the form of a representation before the Central Government. The Central Government should have applied its mind and redirected the workmen to the appropriate Authority. The workmen cannot be allowed to suffer because of wrong Reference made by the Central Government on 22.5.2014.

31. This Court is of the considered opinion that the workmen can still approach the Official Liquidator who may have the remaining sale proceeds deposited in terms of the order of the DRT-I New Delhi as the employees claim has been mentioned in the notice for public auction of property published by the Recovery Officer. The workmen should approach the appropriate forum.

32. The Reference order is set aside.

33. The writ petition is allowed.

Order Date :- 5.8.2019 Arif