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CASE NO.: Appeal (civil)  4101-4103 of 2004

PETITIONER: Radheshyam Ajitsaria & Anr.                              

RESPONDENT: Bengal Chatkal Mazdoor Union & Ors.              

DATE OF JUDGMENT: 24/05/2006

BENCH: Dr. AR. Lakshmanan & R.V. Raveendran

JUDGMENT: J U D G M E N T WITH

SLP(C) Nos. 6257-6258 of 2004

Civil Appeal Nos. 5906 and 5907 of 2004

Dr. AR. Lakshmanan, J.

CIVIL APPEAL NOS. 4101-4103 OF 2004  

These appeals were filed against the final judgments and  orders dated 3.3.2004 of the High Court at Calcutta passed in  APOT No. 271/2001, APOT No. 162/2001 and APOT No.  272/2001.  By the said final judgments and orders, the Division  Bench of the Calcutta High Court held that the appellants have  to be considered as members of the Nemani Group are not  entitled to receive payments on the ground that the said group  being the profounders of scheme and on the ground that  the  dues shown by themselves had not been adjudicated either by  the Court or by the Registrar.  

SLP NOS. 6257-6258 OF 2004  These special leave petitions were filed by M/s Niraj Trading  Company, a registered partnership firm represented by one of its  partner \026 Shri Krishna Kumar Nemani and six others (known as  Nemani Group).  These two special leave petitions were filed by  members of the Nemani Group against the Bengal Chatkal  Mazdoor Union, the Official Liquidator, the Registrar High Court  and Baranagore Jute Factory and the other Mazdoor and  Employees Union.  These petitions were filed against the final  judgment and order passed by the Division Bench of the High  Court at Calcutta in APOT Nos. 227 of 2001 and  228 of 2001  dated 03.03.2004 whereby the Division Bench has allowed the  appeal of contesting respondent No.1 (Bengal Chatkal Mazdoor  Union) and set aside the order passed by the learned Single  Judge dated 08.03.2001 which order had allowed the petitioners  \026 M/s Niraj Trading Company and others of Nemani Group to  receive one-fourth of the adjudicated claim from the Registrar,  Original Side of the High Court at Calcutta upon furnishing a  Bank Guarantee to the satisfaction of the said Registrar of the  equivalent amount.  The said order was set aside by the Division  Bench on the ground that the claim of the petitioners had not  been adjudicated and also by ignoring the earlier orders dated  30.11.1998 and 01.12.1998 passed by the Division Bench of the  High Court which had held that the claims of the unsecured  creditors including the petitioners had been adjudicated.

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CIVIL APPEAL NOS. 5906 AND 5907 OF 2004  

These appeals were filed by Bengal Chatkal Mazdoor Union  and Baranagore Jute Factory PLC Shramik Sabha respectively  against Radheshyam Ajitsaria, Ashok Ajitsaria, Official Liquidator  and Registrar, High Court and the Barnagore Jute Factory.  The  above appeals were filed against the final judgments and orders  of the High Court at Calcutta passed in APOT No. 271 of 2001,  APOT No. 162 of 2001 and APOT No. 272 of 2001 dated  03.03.2004.  The grievance of the appellants in these two appeals  are that the Division Bench while allowing the appeals did not  consider the case of the Unions and did not direct disbursement  of the money to the workers who were members of the Unions.  

BACKGROUND FACTS:         Baranagore Jute Mills PLC (for short ‘the Company’)  was  under the management of Jardine Henderson Limited.  On the  failure of the jute factory to pay  dues of several of its creditors,  various winding-up petitions were filed in the High Court under  the provisions of the Companies Act, 1956.  By an order dated  28.10.1987, the Company Judge directed winding-up of the  Company.  The Court appointed the Official Liquidator with a  direction to take possession of the assets of the said Company.   An application was made by one - Shri Raj Kumar Nemani  praying for stay of the winding-up proceedings of the Company  and for revival of the Company as per a Scheme submitted and  for appointment of an ad hoc Committee of Management to run  the affairs of the said Company. The six Unions agreed to the  Scheme as it was to the benefit of the workers.  The learned  Company Judge stayed the winding up by order dated 15.9.1988  and appointed an ad-hoc Committee of Management to re-open  the mills, but however maintained the assets of the Company  under the Official Liquidator.  One of the creditors filed an appeal  against the order dated 15.09.1998.  An interim order was  passed by the Division Bench of the High Court appointing Joint  Special Officers under whose supervision the Committee of  Management was to be constituted on an ad-hoc basis with other  directions.         Mr. Raj Kumar Nemani being aggrieved by the order dated  27.09.1988 passed by the Division Bench filed a special leave  petition before this Court on 07.10.1988 and this Court, by an  order dated 30.11.1988 directed that the scheme proposed by  Raj Kumar Nemani supported by the workers and unsecured  creditors be accepted with a direction for implementation of  detailed Scheme.  The learned Company Judge was directed to  work out the Scheme.          The order passed by this Court on 30.11.1988 reads as  under:-

       "R.K. Nemani & Anr.                             \005.. Appellants

                                       -Versus-

       Shiva & Co. & Others                            \005.. Respondents

ORDER

       Special leave granted.  Heard, learned counsel for the  parties.  

Having regard to the scope of this appeal and having  considered the report of the Special Officer, dated 13th  November 1988 made pursuant to the order of this Court,  we are of the opinion that the scheme supported by the

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workers and unsecured creditors of Raj Kumar Nemani, be  accepted and a detailed scheme on that basis be formulated.   It is desirable that the scheme be implemented as soon as  possible and the workers and the creditors should be paid in  accordance with the scheme, approved today.  Further, the  appeal is disposed of with a direction to work out the  scheme by the learned Company Judge, Calcutta High  Court, who is seized of the matter.  It is contended by some  of the secured creditors that by the operation of the scheme,  the assets of the secured creditors should not be allowed to  be affected.  This contention of the secured creditors may be  agitated before the Company Judge, if they are so entitled.   All intervention applications are dismissed without prejudice  to their rights, if any, to applicants move the Company  Judge, Calcutta High Court.  

We express our appreciation of the work of the Special  Officer and on the report he has submitted.  The  remuneration of the Special Officer is filed at Rs.5,500/-  and to be paid out of the assets of the Company.  The orders  of the learned Single Judge and the Division Bench are  modified to the aforesaid extent.  

The appeal is disposed of accordingly.  No order as to  costs.                                                                                                          Sd/- (Sabyasachi Mukharji)

      Sd/- (S. Ranganathan) New Delhi, 30th November, 1988."            

       The learned Company Judge approved the Scheme on  16.6.1989.  The Scheme, inter alia, provides for payment of all  unsecured creditors, workers, secured creditors, statutory dues  etc.  On 02.05.1990, appellant No. 1 resigned from the  Management of the Company. The learned Company Judge, while considering several  applications made by unsecured creditors complaining that they  were not paid by the Committee of Management, made an order  dated 16.12.1991 cancelling the Scheme, observing that the  Scheme had totally failed.          On an appeal preferred by the Committee of Management  against the order dated 16.12.1991, the Division Bench of the  High Court made an interim order dated 18.12.1981, reiterated  on 24.3.1992 directing payment of 1% of the respective claims to  all creditors on or before 7.1.1992.  The Bench also stayed the  order passed by the learned Company Judge dated 16.12.1991  ordering cancellation of the Scheme.  A special leave petition was  filed against the order dated 24.03.1992 by one of the creditors.   This Court directed the appeal pending before the Division Bench  of the High Court to be disposed of expeditiously, while also  directing payment to the unsecured creditors to be made @ 2%  per month from 01.03.1993.  The said order dated 22.03.1993 in  S.L.P.(C) No. 6505 of 1992  reads as follows:-

"Acumen Trading Corporation & Anr.      \005.. Petitioners

                                               -Versus-

Committee of Management of Baranagore  Jute Factory & Ors.                             \005..Respondents

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Dated : 22nd March, 1993

Coram:  Hon’ble The Chief Justice                  Hon’ble Mr. Justice A.S. Anand

ORDER

1.      We have heard counsel for all the parties.  

2.      By an order dated 16th December 1991, the learned  Company Judge of the Calcutta High Court cancelled the  scheme earlier sanctioned on the ground that the terms of  the scheme particularly in the matter of the schedule of  payments to the creditors had not been complied with.   That order was carried up in appeal before the Division  Bench of the High Court, which by its order dated 24th  March 1992 now under appeal, stayed the order of the  learned single Judge.  The Division Bench directed that  instead of payment of 2% p.m. to the unsecured creditors  contaminated by the scheme, there should be payment of  1% p.m.  That was the effect of the order dated 24th March  1992 of the Division Bench, when it referred to and  incorporated its earlier order dated 18th December 1991.  

3.      It is not disputed that payments to the unsecured  creditors have not proceeded strictly in terms of the  scheme.  There is substantial short-fall.  The parties who  have taken over the company under the scheme and who  are liable to effect payments to the creditors in terms of the  scheme cannot take shelter behind the fact that auditors of  the company have not scrutinised the books of account of  the company.  That is a matter over which the unsecured  creditors have no control.  Till the auditor examine the  books of account and report that the claim of the extent of  the claim of the unsecured creditors was not supportable,  there could be no suspension of the scheme of payments.  

4.      On a consideration of the matter it appears  appropriate that the appeal before the Division Bench of the  High Court requires to be disposed of expeditiously.  We  request the High Court to dispose of the appeal within three  months.  

5.      In the meanwhile payment to the unsecured creditors  should proceed at the rate of 2% p.m. from 1st March 1993  and not at 1%.  The difference for the past on that  calculation shall be made good within three months from  today.  If there is failure to do so, it will be appropriate for  the Division Bench to put that circumstance also into scale  in deciding whether the order of the learned single Judge  setting aside the scheme should be interfered with in  appeal or not\005.."

6.      However, the order of the Division Bench staying the  operation of the order dated 16th December 1991 of the  learned single Judge will continue unless the Division  Bench itself considers it appropriate to modify the same in  the light of any subsequent event.  The Division Bench shall  also be at liberty to consider any applications for the  modification of the scheme.  

       With these observations and directions the special  leave petition is disposed of.

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Sd/-                                                                    Sd/- (Virender K. Sharma)                                    (S.R. Thite) Court Master                                            Court Master"

       By subsequent orders, this Court directed the Committee of  Management to deposit Rs. 40 lacs in two instalments which was  to be deposited in the Registry of this Court.  The said amount  was kept in term deposits.  On 11.03.1994, this Court set aside  the order of the Division Bench of the Calcutta High Court  passed on 24.03.1992 reducing rate of payment from 2% to 1%.   This Court also directed the Committee of Management to deposit  from the month of April, 1994 onwards a sum of Rs. 8 lacs per  month with the Registry of Calcutta High Court.  Further  directions were also issued while remanding the matter back to  the learned Company Judge for distribution of Rs. 40 lacs  amongst the creditors.  The above order reads as follows:- "Acumen Trading Corporation & Anr.    \005.. Petitioners

Versus

Committee of Management of Baranagore Jute Factory & Ors.                             \005.. Respondents

ORDER

       We have heard counsel on both sides, originally the  learned Company Judge in the High Court directed the  "Committee of Management" to deposit sums equivalent to  2 per cent per month calculated on the basis of the extent  of unsecured indebtedness of the company.  Subsequently,  there was a modification of this order as to the rate of the  payment reducing the extent from 2 per cent month 1 per  cent per month.  This was done by the appellate bench.   The unsecured creditors have come up against this order.   The unsecured creditors claim that debts due and owing to  them are in the neighbourhood of Rs.3.4 crores and that it  would take a long time for payment if only 1% per month is  paid.  

       In the meanwhile, the Committee of Management has  deposited in the Registry of this Court, a sum of Rs.40 lacs  under directions of this Court.  The said sums are in term- deposits with the bank.  

       On a consideration of the matter, we set aside the  order of the Division Bench reducing the amount from 2  per cent per month to 1 per cent per month.  The  Committee of Management shall from the month of April  1994 onwards, deposit every month sum of Rs.8 lacs.   Deposits will be made in the High Court.  

       The matter will now go back to the learned company  Judge, Calcutta High Court who will issue necessary  directions as to the appropriation and distribution of Rs.  40 lacs now in deposit, amongst the creditors and also as  to the distribution of the sum of Rs. 8 lacs to be deposited  every month by the Committee of Management.  It is made  clear that if the Committee of Management commits  default in the matter of these deposits and fall in arrears  for any two months, it will be appropriate for the Company  Court to replace the Committee of Management by an  appropriate alternative mechanism.  The amount of Rs.40  lacs in deposit in this Registry shall be transferred to the

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account of the Registrar (Original Side), High Court of  Calcutta, together with accrued interest immediately after  the present deposits mature.  

       A grievance was aired by the petitioners that the  Committee of Management is appropriating to itself the  funds of the Company towards its alleged claims as  unsecured creditor.  Sri Santosh Hegde says this is  impermissible.  It is open to the petitioners to move the  Company Judge in this regard.  The contention of the  Committee of Management on this point is also left open.  

       The interlocutory applications are disposed of  accordingly.  

                                                       Sd/-    CJI  

Sd/- (S. Ratnavel Pandian) New Delhi, March 11, 1994."         

       On 13.12.1994, the learned Company Judge appointed a  new Committee of Management composed of the Jain-Jalan  group, while issuing necessary directions for deposit of Rs. 64  lacs by the Jain-Jalan group with the Registrar of the High  Court.  The Company Judge also directed certain lump sum  payments to six substantial creditors, except Nemani Group on  the basis of the list approved in the Court’s Scheme prior to cut- off dates in October, 1987 before issuing advertisement inviting  claims from creditors, while directing payments to be made to  certain parties.   An appeal against the said order dated 13.12.1994,  the  Division Bench allowed the Jain-Jalan group to continue and  carry on with the process of the Scheme, but set aside the  direction for preferential payment to six named unsecured  creditors. The learned Company Judge by order dated 23.12.1996  also directed all unsecured creditors to lodge their claims with  the Registrar of the High Court.  The learned Company Judge, on  the note of the Registrar, directed, inter alia, the Registrar of the  High Court to confine to the claims of those unsecured creditors  as on 28.10.1987 i.e. the date of winding-up order and the  amounts quantified against their names in the list of unsecured  creditors appended to the Company Application No.63 of 1987  affirmed on 27.4.1997.  Pre-scheme unsecured creditors  including the appellants lodged their respective claims with the  Registrar on 27.02.1997.  The Registrar submitted the second  report excluding the names of the appellants (Radheshyam  Ajitsaria) while including the name of the Nemani group.  The  Company Judge, on an application filed by the appellants  (Ajitsaria’s group) directed the Registrar to hear to the  submissions of the appellants with regard to their exclusion.  The  appellants made their submissions and filed written notes in  support of their contentions before the Registrar and thereafter  the Registrar, on 23.04.1997, submitted a report including  names of the appellants (Ajitsaria’s group) as persons entitled to  receive payments in terms of the Scheme.  The Company Judge,  by a detailed judgment dated 9.9.1998 directed the Registrar to  make payments of all creditors as per the revised statement  enclosed to the Supplementary (Second) Report,  except to the  Nemani group. The Division Bench, in an appeal against the  order dated 09.09.1998 filed by Jardine Handerson Ltd., made  an order on 30.11.1998/1.12.1998 set aside the Registrar’s

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report insofar as the same exceeded the amount mentioned in  the list annexed to Company Appln. No.63 of 1987. The  Registrar, despite the appellants not being held as part of the  Nemani group, however, did not make any payments to the  appellants.  The appellants filed an application by way of Notice  of Motion, inter alia, praying for modification of the order dated  09.09.1998 and for a further direction not to treat the appellants  as part of the Nemani group with a further prayer for immediate  payment in terms of the sanctioned Scheme. On 08.03.2001, the  learned Company Judge directed payments to be made to the  appellants, inter alia, holding that the appellants were not the  part of the Nemani group and that their claims were already  adjudicated upon and settled by the Registrar, Original Side.           One Shri Chetan Chowdhury claiming himself to be one of  the Directors of the Company filed an appeal against the order  dated 08.03.2001.  The Division Bench, while granting liberty to  the appellants to withdraw the amount deposited against its  name/claim by furnishing a Bank Guarantee also recorded that  it is not clear as to why Chetan Chowdhury and his group could  be in the possession of the Company and listed the appeal for  further directions. On 14.05.2001, the appellants - Ajitsaria’s group received  payments from the Registrar of the High Court upon furnishing  the requisite Bank Guarantee.  Learned single Judge of the High  Court passed an order on 19.12.2002, inter alia, holding that the  possession of the Company by the alleged Board of Directors was  wrongful, while directing the Official Liquidator to take  possession of the Company (in liquidation).  Several appeals were  preferred from the order.  The Division Bench, while staying the  operation of the order dated 19.12.2002, directed the Joint  Special Officers to take possession.   The Division Bench in appeals filed against the order dated  08.03.2001 made an order dated 3.3.2004 directing  re- adjudication of the claims of the appellants which had already  been adjudicated.  According to the appellant, the Division Bench  without appreciating that the appeal itself was not maintainable  having been filed by 9 outsiders having no locus standi is not  correct in directing re-adjudication of the claims of the petitioner.   The Bench also dis-allowed the appellant’s rights to claim the  said amount as a member approved in the list of unsecured  creditors distinct from the Nemani group.  Being aggrieved by the  impugned judgment dated 3.3.2004, the appellants filed the  above appeals in this Court.  This Court, on 08.04.2004, issued  notices in the special leave petitions and also directed that the  Bank Guarantee filed by the appellants with the Registrar of the  High Court on the original side shall be kept renewed until  further orders.  By order dated 12.07.2004, leave was granted.  The Registrar of the High Court issued two certificates, inter  alia, certifying that the last instalment of Rs. 8 lacs was  deposited on 8/9.12.1999 and also certified that a sum of  Rs.2,09,70,647.56 p. was lying with the Registrar in a separate  account. We heard Mr. Jaideep Gupta, learned senior counsel  appearing for the petitioners in S.L.P.(C) Nos. 6257-6258 of 2004,  Mr. Rana Mukherjee, learned counsel appearing for the  appellants in Civil Appeal Nos. 4101-4103 of 2004, Mr.  Varinder  Kumar Sharma, learned counsel, Mr. S.K. Begaria, leaned senior  counsel, Mr. R.F. Nariman, learned senior counsel and Mr.  Naresh Kumar, learned counsel appearing for the respondents.     Mr. Jaideep Gupta, learned senior counsel appearing for  petitioner No.1, M/s Niraj Trading Company and Raj Kumar  Namani, petitioner No.4, submitted that the High Court has  erred in holding that the dues shown against the members of  Nemani Group were shown by themselves and that dues of the  Nemani Group have not been adjudicated by the High Court or

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by the Registrar.  He would submit that the High Court has failed  to appreciate that the disbursement by Registrar took place after  submission of the third report dated 10.4.1997 and the payment  to pre-scheme unsecured creditors were available with the  Registrar, Original side.  According to Mr. Jaideep Gupta, the  Division Bench should not make any discrimination amongst the  same category of pre-scheme unsecured creditors mentioned in  the list annexed to the scheme of management who have lodged  their claims with the Registrar, Original side.          Mr. Jaideep Gupta, learned senior counsel, submitted  that  the Judges of the Division Bench have erroneously concluded  that the petitioners were not part of the pre-scheme creditors and  that their names were not included in the list of  pre-scheme  creditors filed along with C.A.No.63 of 1987 and that the Bench  has also erred in holding that the claims of the petitioner had not  been adjudicated which was clearly contrary to the report of the  Registrar, original side, which was accepted by both the Judges  as well as the Division Bench.  It was further submitted that at  the present stage the workers do not have a right to oppose the  payment to the Nemani Group out of the funds lying with the  Registrar, original side.  In the light of the above, Mr. Jaideep  Gupta submitted that there is nothing on record justifying  withholding of payments to be petitioner-group, who undoubtedly  were pre-scheme creditors and whose claims had been finally  adjudicated upon by the Registrar, original side, which  adjudication has been upheld both by the learned single Judge  as well as by the Division Bench.  Further based on such  adjudication all other unsecured creditors have been paid, while  only 25% of the total amount due and payable to the petitioner- group has been directed to be paid by the learned single Judge  by the order dated 8.3.2001.  The funds available at the hands of  the Registrar is far in excess not only of the 25% ordered to be  paid but in excess of the entire claim of the petitioner-group.    It  was also submitted by Mr. Jaideep Gupta that a sum of Rs. 42  crores which was received by way of acquisition compensation is  now with the company.  This apart, the assets are also lying with  the company.  In these circumstances, it is submitted that it is  only just and proper that the order passed by the learned single  Judge be upheld and payments be made to the Nemani Group.  It  is also pertinent to notice that all other unsecured creditors  including Jardine Henderson (the original management at the  time when the winding up order was passed) and the Jain Jalan  Group (being in management after 1994) have been fully paid  their dues as unsecured creditors out of the funds in the hands  of the Registrar, original side.  Mr. Jaideep Gupta took us through the pleadings,  annexures and orders passed thereon on various occasions by  different Courts.        Mr. Rana Mukherjee, learned counsel, appearing for the  appellants in Civil Appeal Nos. 4101-4103 of 2004 submitted  that appellant No.1 remained as a member of the Committee of  management only for a period of 11 months having resigned on  2.5.1990 and that appellant No.2 never participated in the  management and affairs of the company (in liquidation)  and no  one including the workers made any claim and/or grievance  against the appellants at any point of time. The said fact has been duly noticed and recognized in  various Court orders including the order of the Division Bench  dated 30.11.1998 and 1.12.1998 and the order of the Registrar  dt. 8.3.2001.  According to Mr. Rana Mukherjee, the appellants’  firm Radheyshyam & Co. and Indian Agency never formed part of  Nemani Group and the same would be evident from the letters  written by the workers’ Union and submitted before the Company  Court.  The appellants are the unsecured creditors of the  Company who were entitled to receive payment in terms of the

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Scheme @ 2% p.m. at the entire payment in terms of the said  Scheme without interest was to be disbursed to them within a  span of four years and two months and accordingly the entire  amount became due and payable in the year 1993 itself.  There is  also no allegation upon the appellants to disburse excess  payments to themselves as has been alleged against Raj Kumar  Nemani, therefore, the appellants stand on a different footing  from the Nemani Group of Companies/firms who have been  made entitled to receive only 25% of their claim upon furnishing  of bank guarantee.  It was also submitted that the appellants  have received their dues as certified by the Registrar of the  Calcutta High Court under orders of the said Court upon  furnishing a bank guarantee which has been kept alive.   According to Mr. Rana Mukherjee, the main judgment and order  warrants interference by this Court as the appellants have been  wrongly excluded from receiving the payments though all other  creditors similar to the status of the appellants have received  their payments long back.  Thus accordingly to him, there has  been denial of justice.           Mr. S.K. Bagaria, learned senior counsel appearing for the  Baranagore Jute Factory PLC Shramik Sabha, submitted that the  Scheme was sanctioned and approved by the High Court and by  this Court primarily taking into consideration the workers’  interests and that the workers and their Unions supported the  Scheme and the Scheme provided for payment of pre-scheme  outstanding dues and current dues of the workers.   According to  him, Nemani Committee defaulted in making payment of wages,  provident fund, ESI, gratuity etc. not only towards the  outstanding pre-scheme arrears but also the current dues during  its period of management.  In addition to the defaults committed  by Nemani Committee in payment of the said outstanding pre- scheme dues, the said Committee also defaulted in paying the  workers; current dues during its period of management.  It was  further submitted that all other pre-scheme unsecured creditors  who lodged their claims with the Registrar of the High Court,  have already received their payments and as against the  aforesaid, the workers have hardly received a small fraction of  their outstanding dues for the pre-scheme period and over and  above that, their huge dues got mounted for the current periods  during which Nemani Committee was in management.  The  Scheme being primarily for the benefits of the workers and  unsecured creditors and all other unsecured creditors excepting  the appellants having already been paid, it is in the interest of  justice and in terms of the Scheme that the amounts  accumulated under the Scheme be directed to be utilized for  paying the workers’ dues and statutory liabilities on account of  Provident Fund, ESI, wages, bonus, gratuity, STL etc.  He invited   out attention to Section 11(2) of the Employees’ Provident Funds  and Miscellaneous Provisions Act, 1952 which provides that the  amounts due from an employer shall be deemed to be the first  charge on the assets of the establishment and shall be paid in  priority to all other debts.  It was submitted that the workers and  their Unions supported the scheme in expectation and hope that  their outstanding dues as well as current dues would be paid by  Nemani Committee as specifically provided in the Scheme.   Similar was the position when the Jain-Jalan Committee was in  management.  However, when they came to know about filing of  applications by Sri Raj Kumar Nemani and by Sri Radheyshyam  Ajitsaria and their group concerns before the learned single  Judge of the High Court for payment of their dues out of the  funds accumulated under the Scheme, the Unions moved two  separate applications bearing C.A.No.9 of 1999 and C.A.No.10 of  1999 before the learned single Judge praying, inter alia, for not  directing any such payment without first paying to the workers.   Arguing further, the learned senior counsel, submitted that all

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unsecured creditors excepting the appellants have already been  paid.   In the aforesaid circumstances and in terms of the  Scheme, the amounts lying with the Registrar of the High Court  are required to be utilized for paying the workers’ dues.   According to him, the Division Bench of the High Court correctly  held that the release of any amounts to the Members of the  Nemani Group at this stage is not appropriate.  However, the  Division Bench of the High Court erred in not directing for  payment of the workers’ dues out of the amounts accumulated  under the Scheme and lying with the Registrar as has been  contended by Shramik Sabha in the appeal filed by it  (C.A.No.5907/2004). It was further submitted that as stated in C.A.No.5907 of   2004 filed by Shramik Sabha, the Division Bench should have  directed for utilizing the balance amount lying with the Registrar,  Original side, High Court of Calcutta for payment of workers’  dues and statutory liabilities on account of the Provident Fund,  ESI, wages, Gratuity, bonus etc.  It was further submitted that a  period of 18 years has passed since approval of the Scheme by  this Court on 30.11.1988 and it will be fully in terms of the  Scheme as well as Section 11(2) of the Employees’ Provident  Fund and Miscellaneous Provisions Act, 1952, if the funds lying  with the Registrar are utilized for payment of the workers’ dues  including those on account of outstanding Provident Fund dues  mentioned above. Mr. R.F. Nariman, learned senior counsel appearing for the  Bengal Chatkal Mazdoor Union, submitted that as per the  scheme, the workers were to be paid in a time bound schedule.   The arrears of back wages were to be cleared within five months  of the restarting of the mill.  Several other dues, namely, gratuity,  ESI, Provident Fund, Welfare Fund etc. were also to be cleared in  the manner prescribed under the Scheme.  However, these  payments were not made by the Nemani Group and instead a  large sum of money was paid to themselves.   

       It is alleged that the failure to pay the amounts is squarely  on account of the Nemani Group and at the time when these  arrears were mounting, they were paying themselves a greater  sum of money than was due under the Scheme.  The appellants  cannot be allowed to take advantage of their own wrong.   Mr.  R.F. Nariman further submitted that the Scheme has to be read  as a whole and in case payment is not made under one part of  the Scheme, i.e. to the workers, the same Scheme cannot be  relied upon to make a payment to the unsecured creditors.  In  this context, he relied on the judgment of this Court in the case  of Workers vs. Rohtas Industries, (1987) 2 SCC 588 where this  Court held that the claims of the workers have a priority even  above those of secured creditors.  Mr. R.F. Nariman drew out  attention to Section 529 A of the Companies Act, 1956 for the  proposition that the priority is to be given to the dues of the  workers.  Though the winding up order has been stayed, the  provisions of Section 529 A of the Companies Act, 1956 will apply  in letter if not in spirit.  According to him, the provision is  applicable in a winding up of an insolvent company and as per  Section 441 of the Companies Act, 1956, winding up is deemed  to commence upon the presentation of the petition for winding  up.  Further, in case the money is disbursed without regard to  Section 529A of the Companies Act, 1956, and ultimately the  stay of the winding up is lifted, there would be an effective  annulment of the legislative mandate provided in Section 529A of  the Companies Act, 1956.         He also invited our attention to Section 11(1) of the  Employees’ Provident Fund and Miscellaneous Provisions Act,  1952 and Section 94 of the Employees’ State Insurance Act, 1948  which also provide for a first priority to these dues in respect of a

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company in winding up.         Section 11(2) of the Employees’ Provident Fund and  Miscellaneous Provisions Act, 1952 is reproduced hereunder: "11(2) Without prejudice to the provisions of sub- section(1), if any amount is due from an employer  whether in respect of the employees’ contribution  (deducted from the wages of the employee) or the  employer’s contribution, the amount so due shall be  deemed to be the first charge on the assets of the  establishment, and shall, notwithstanding anything  contained in any other law for the time being in force,  be paid in priority to all other debts."   

While interpreting the provisions of Section 11(2) of the  Employees’ Provident Fund and Miscellaneous Provisions Act,  1952 and while noting that the Provident Fund Act is a piece of  welfare legislation have accorded priority to these dues over other  dues.  In this context, he cited the following rulings: 1.      Recovery Officer & Assistant Provident Fund  Commissioner vs. Kerala Financial Corporation,  2002(95) FLR 1024 paras 7,10,13,14 (High Court of  Kerala) 2.      National Stock Exchange of India Ltd. Rep. By its  authorized signatory A. Sabastian vs. The Assistant  Provident Fund Commissioner Employees’  Provident Fund Organisation and the Managing  Director, Premier Securities Ltd. (W.P. Nos. 24857  and 25609 of 2001, para 32) High Court of Madras. 3.      Manager, Vijaya Bank, Padubidri, Dakshina  Kannada vs. Regional Provident Fund  Commissioner, Sub-Regional Office, Balmatta,  Mangalore and Ors. 1999(5) Kar.L.J.459, para 7  (Karnataka High Court)

At the very least, by virtue of Section 11(2), the claims of the  Provident Fund authorities are akin to secured claims and,  therefore, have a priority over the unsecured claims and that the  amount of money lying with the Registrar is far less than the  arrears of the Provident Fund department and, therefore, in  consonance with the legislative mandate embodied in Section  11(2) of the Employees’ Provident Fund and Miscellaneous  Provisions Act, 1952, the money should first be paid to the  provident fund authorities before they are disbursed to  unsecured creditors.  Concluding his arguments, Mr. R.F.  Nariman submitted that in the present case, substantial justice  has been done to the workers and no interference by this Court  is called for.  When dealing with an appeal under Article 136 of  the Constitution of India, this Court comes to the conclusion that  there is no failure of justice, it is not bound to decide and  interfere even when a question of jurisdiction of the original  Court of Tribunal is raised and even if the impugned judgment is  wrong.  The following rulings have been cited for the above  proposition: 1.      Balvantrai Chimanlal Trivedi vs. M.N.  Nagrashna, AIR 1960 SC 407 2.      Bulaki vs. Lal Dhar, (1997) 9 SCC 274, para 3 3.      Union of India vs. Kulamoni Mohanty,  (1999) 1  SCC  185 paras 4,6  4.      Taherakhatoon vs. Salambin Mohammad, (1999)  2 SCC 635 para 20 5.      Chandra Singh vs. State of Rajasthan, (2003) 6  SCC 545 paras 39 & 45 6.      State of Punjab vs. Savinderjit Kaur, (2004) 4  SCC 58 paras 16 & 17                    

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Mr. Naresh Kumar, learned counsel appearing for  Baranagore Jute Factory PLC (R-4 in SLP(C) Nos. 6257-6258 of  2004, furnished details in regard to the payment of arrears of  wages of the workers of the Mill, payment to the statutory  creditors, arrears of gratuity etc.  According to him, Nemani \026  Ajitsaria Group committed several offences; that they did not  make payment on receipt of arrear dues and statutory dues as  per the Scheme and that default in making current payment of  wages and other statutory dues and they siphoned huge sums of  money while they were running the Jute Mills.  He submitted, at  the request of a section of the workers, Directors of the Company,  to control the Jute Mills and immediately thereafter filed an  application before the High Court stating the background under  which the Management took control of the Jute Mills and also  prayed for liberty from the High Court to take steps for revival of  the Company.  The High Court appointed a Special Officer with  certain directions.  He also furnished other details subsequent to  the appointment of the special Officer.  He invited our attention to  the report filed by the Special Officer as per the directions of the  Division Bench, details about the status of the Company and the  details regarding the company’s writ disputing the arrear, PF  liability and their reply to the allegations made by the Nemani  Group.  According to him, the funds are meant for disbursement.   It was never the intention of the High Court to allow Nemani  Group to run the mill for their own personal gain without  complying and/or paying the workers and other creditors.  The  defaults and/or evasion made by them is their personal liability  as has categorically been clarified by the judgment dated  19.11.1994 passed by the High Court.  He further submitted that  the arrears of wages of the Workers of the Mill have since been  reduced by the Committee of Management by payment of Rs.22  lacs on account of arrears of wages for two weeks and Rs.17 lacs  on account of 50% of the arrears of bonus for the year 1985-86  and that the arrears of wages now stands at Rs.54 lacs and at  Rs.17 lacs on account of the balance of the arrears of bonus  aggregating to Rs.71 lacs which would be paid by the Committee  of Management. As regards payment to the statutory creditors, it was  submitted that the Committee of Management will pay the  aforesaid arrears of statutory dues which have accrued during the  previous management.  Likewise, the arrears of gratuity payable  to the workers/employees who have already retired or  superannuated or resigned or ceased to be in service of the  company have accumulated during the period of previous  management to the tune of Rs. 36 lacs approximately. It was  submitted that the Committee of the Management will arrange for  payment of such amount of gratuity to such workers.    It is to the  credit of the present management that they have apparently  succeeded in turning the Company and resurrecting the Jute  Mills.  While the workers have jointly supported the achievement  of the present Management, the statutory creditors have also  come out in support of the present management.   In the above background, the questions of law that require  determination in the instant Civil appeals and the S.L.P. are as  under: (a)     Whether the Division Bench of the High Court  was entitled to allow the appeal without first  deciding the maintainability of the appeals as  directed in terms of the order dated 29.3.2001? (b)     Whether the Division Bench of the High Court  was entitled to withhold the payment of the pre- scheme unsecured creditors in view of the  specific direction given by this Court on  31.3.1994?

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(c)     Whether the Division Bench was entitled to direct  re-adjudication of the claims, which were already  adjudicated contrary to the order passed by the  Division Bench of the High Court on 30.11.1998  and 1.12.1998? (d)     Whether the workers can have any stake and  have right to receive any payment from the fund  lying with the Registrar original side of the High  Court of Calcutta which was specially earmarked  for the pre-scheme unsecured creditors as  defined in the Scheme? (e)     Whether the finding and decision of the learned  Company Jude can be ignored and/or overlooked  on the ground that no enquiry was held by the  Registrar? We have carefully considered the elaborate and lengthy  submissions made by the respective counsel appearing on either  side with reference to the pleadings, annexures filed and the  orders passed   by the Company Court, the High Court and of this  Court. As already noticed, Baranagore Jute Factory \026 petitioners in  S.L.P.) Nos. 6257-6258 of 2004, was ordered to be wound up on  October 28, 1987.   The petitioners’ group comprises of (i) Niraj  Trading Company; (ii) Banwarilal Anup Kumar HUF, (iii) M/s Raj  Kumar Krishna Kumar, HUF; (iv) Raj Kumar Nemani; (v) Nemani  Trading Company ; (vi) Krishna Kumar Nemani and (vii) Raj  Kumar Jain  constituted the largest group of creditors of the Jute  Factory and were accordingly included in the list of pre-scheme  creditors prepared and filed in C.A.No.63 of 1987 at S.Nos. 1 to 7  by the erstwhile management i.e. M/s Jardine Henderson Ltd.   After the winding up order was passed, a Scheme was  propounded to run the Jute Mill and for this pupose, a Committee  of Management was proposed to be constituted of M/s Niraj  Trading Company commonly referred to as the Nemani Group.   The said scheme propounded by the Nemani Group provided for  payments to workers, electricity dues, statutory creditors and  unsecured creditors.  This comparmentalised payment  mechanism was adopted to ensure that everybody was paid in  accordance with and under the Scheme.  The said scheme was  approved both by the High Court as well as by this Court on  November 30, 1988.  The said scheme was finally approved and  passed by the High Court with the support of the secured  creditors as well as the workers.  Thereafter some unsecured  creditors approached the High Court for payment under the  scheme and especially since pursuant to order of the High Court,  the payment under the scheme stood reduced from 2% as  envisaged under the scheme to 1%.  The matter was carried up in  appeal to this Court and this Court directed the Nemani Group to  deposit a sum of Rs.40 lacs as and by way of an interim measure.   By an order dated 11.3.1994, this Court set aside the order of the  High Court reducing the amount from 2% to 1% and further  directed the Committee to deposit Rs.8 lakhs per month.  The  amount of Rs.40 lakhs deposited by the Nemani Group was  directed to be transferred to the High Court.  It is pertinent to  mention that at this stage no grievance was made by the workers  and as such the question of consideration of their claim does not  and cannot arise.  Moreover, the order in no uncertain term  provides that the payments made pursuant to such order i.e.  order dated 11.3.1994 were to be disbursed amongst creditors.   We have already noticed that the Nemani Group was  replaced by the Jain Jalan Committee of Management.  The  learned single Judge, by order dated 13,12,1994, directed that  the Nemani Group be replaced and the Jain-Jalan Group may  take over the Committee of Management subject to payment of  Rs.64 lacs and further directed payments to substantial creditors

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except the Nemani Group.  This order was carried up in appeal  before the Division Bench and the Division Bench by an order  dated 25.1.1995 set aside the order for preferential payments to  certain creditors and left the issue relating to payments to the  Nemani Group open.  The learned single Judge, by an order dated  26.8.1996, in view of the substantial funds having accumulated  in the hands of the Registrar, Original side directed the parties to  file their claims as directed by this Court and further directed the  Registrar to adjudicate the claims in accordance with law.  The  learned single Judge by its order dated 23.12.1996 clarified that  only pre-scheme unsecured creditors appended to the company’s  application being C.A.No.63 of 1987 affirmed on 27.4.1987 were  to be considered for payment.  The Registrar, Original side was  further given the liberty to requisition the services of a Chartered  Accountant to adjudicate upon the claims of the unsecured  creditors.  Thereafter, reports were prepared by the Registrar.   The third and final report dated 23.4.1997 of the Registrar was  accepted by the High Court.  In the said report, it was  categorically recorded that full and final adjudication of the net  claim of pre-scheme unsecured creditors will appear as per the  schedule set out hereinbelow.  The names of the members of the  Nemani Group were included at S.Nos. 60 to 66 and an amount of   Rs. 2,29,34,500/- was adjudicated  to be outstanding as far as  the Nemani Group is concerned. The learned single Judge by order dated 9.9.1998 accepting  the final adjudication made by the Registrar directed payments to  be made to all the other unsecured creditors except the Nemani  Group on the ground that the Nemani Group had made larger  payments to members of its group in comparison to other  unsecured creditors.    This order was subsequently affirmed by  the Division Bench in an appeal filed by Jardine Henderson.  The  Division Bench while disposing of the said appeals upheld the  adjudication made by the Registrar, subject to adjustments.   Nemani Group filed C.A.No.627 of 1998 for modification of the  order dated 9.9.1998.  On 8.3.2001, the learned single Judge  disposed of C.A.No.627 of 1998 filed by Nemani Group for  modification of the order dated 9.9.1998.  The learned single  Judge, after noticing that all other unsecured creditors had been  paid of and even thereafter substantial funds were left in the  hands of the Registrar, directed payment of 25% and/or one  fourth of their settled claim after adjustment of payments already  made.  Appeals were preferred by the workers’ Union and  respondent No.4 (Jute Factory) under the new Management of  Chetan Choudhary.   The Division Bench while admitting the  appeal by an order dated 29.3.2001 directed that the Nemani  Group be allowed to withdraw the monies subject to furnishing a  Bank Guarantee of the like amount.  Further doubts as to the  locus standi of Chetan Choudhary to represent the Company  were also raised and the same were kept open.  The workers  contended that there was no change in circumstances or  additional material on record justifying the direction for payment  to the Nemani Group and further that they had filed C.A.Nos. 9  and 10 of 1999 giving details of their dues.  In so far as the  change in circumstances is concerned, by the time the order  dated 8.3.2001 was passed, all other unsecured creditors had  been paid of and still substantial sums were available for  disbursement.   As regards the pending applications are  concerned, this court has noticed, during the course of hearing,  that the said applications were really in the nature of  intervention applications.  In spite of the above, the Division  Bench of the High Court has erroneously concluded that the  petitioners-Nemani Group were not part of the pre-scheme  creditors and/or that their names were not included in the list of  pre-scheme creditors filed along with C.A.No. 63 of 1987.  The  Division Bench also erred in holding that the claims of the

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petitioners-Nemani Group had not been adjudicated which, in  our opinion, was clearly contrary to the report of the Registrar,  which was accepted by both the learned single Judge as well as  by the Division Bench.  The above facts clearly go to show and administer that the  workers do not have a right to oppose the payment to all  unsecured creditors out of the funds lying with the Registrar,  Original Side, High Court.  The reasons for our conclusion are as  under: (a)     By order of this Court the said funds are meant for  disbursement only for unsecured creditors.  Separate  arrangements have been made under the scheme for  payment of other dues including workers dues.  The  said scheme sanctioned in 1989 is still in operation  and the present Committee of Management is  operating under the same scheme.  (b)     Since 1994, i.e. after the Petitioner Group was  superceded by the Jain Jalan Group, no demands of  any nature relating to any outstanding payments were  ever raised by the Workers.  (c)     In any event, it has been clearly recorded in the order  dated November 18, 2004 whereby the said Chetan  Choudhary Group has been allowed to continue in  management, that the said Chetan Choudhary Group  is being allowed to be continued on the same terms  and conditions as under the original sanctioned  scheme, thus making them liable to make payments of  all dues past or present.  (d)     Therefore, the company being a running concern, the  alleged dues of the workers cannot be claimed against  any specific member of the management committee.   The dues if any, are against the company and not  against any individual members of the Committee of  Management.  There is no question therefore of  holding up payment due to the unsecured creditors on  the ground that workers dues are alleged to be  outstanding.  (e)     Further, since the company still continues to function,  Section 529-A of the Companies Act cannot be pressed  into service by the workers.  The protection of section  529-A is available only when a company has been  wound up, Official Liquidator has taken over the  assets and disbursements are being made by the  Official Liquidator in course of the winding up of the  company.  There is no question of the worker claiming  a preferential right or payment while a company is  running and carrying on business in the usual course  and incurring daily expenses and liabilities. In the light of the above, Mr. Jaideep Gupta, learned senior  counsel, submitted that there is nothing on record justifying  withholding of payments to the Nemani Group, who undoubtedly  were pre-scheme creditors and whose claims had been finally  adjudicated upon by the Registrar which adjudication has been  upheld both by the learned single Judge as well as by the  Division Bench.  It is also not in dispute that the funds available  at the hands of the Registrar is far in excess not only of the 25%  ordered to be paid but in excess of the entire claim of the  petitioner-Nemani Group.   In view of the above, we are of the opinion that the claim of  the Nemani Group and Niraj Trading Company has to be upheld  and accepted and the payment should be ordered to.   In the result, S.L.P(c) Nos. 6257-6258 of 2004 are allowed  and the impugned judgment and order dated 3.3.2004 in APOT  Nos. 227 & 228 of 2001 common with APOT No. 271 of 2001  passed by the Division Bench is set aside.     

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The claim made by Radheyshyam Ajitsaria and Anr. In  C.A.Nos. 4101-4103 of 2004 We have already discussed in detail in paragraphs supra  about the facts and circumstances of the above appeals and the  various proceedings taken out by the parties and the orders  passed thereto. In view of the discussion made above, the following  conclusion can be arrived at: i)      Appellant No.1 remained as a member of the  Committee of management only for a brief period of  11 months having resigned on 2.5.1990.  Appellant  No.2 never participated in the management and  affairs of the company, no one including the  workers made any claim and/or grievance against  the appellants at any point of time. ii)     The appellants are unsecured creditors of the  Company who were entitled to receive payment in  terms of the scheme at the rate of 2% per month  and the entire payment in terms of the said scheme  without interest was to be disbursed to them  within a span of four years and two months and  accordingly the entire amount became due and  payable in the year 1993 itself. 1.      At all material times, there was no dispute with  regard to the fact that Nemani Group of  Company  consisted of seven companies/firms which are  distrinct and separate from the appellants.

The said fact has been duly noticed and recognized in various  Court orders including the order of the Division Bench of the  High court dated 30.11.1998/1.12.1998 and the order of the  learned single Judge dated 8.3.2001. iv)     There is no allegation upon the appellants of  disbursing excess payments to themselves as has been  alleged against Raj Kumar Nemani, therefore, the  appellants’ stand on a different footing from the  Nemani Group of companies/firms who have been  made entitled to receive only 25% of their claim upon  furnishing of bank guarantee. v)      That the appellants have received their dues as  certified by the Registrar of the High Court under  orders of the High court upon furnishing a bank  guarantee which has been kept alive.      So far as the workers’ claim in concerned, the scheme  which was accepted by this Court on 30.11.1998 contained  disbursement of the payment to all the creditors in the said  scheme.  The said scheme clearly mentioned the manner in which  the creditors are entitled to receive the payment.  The statutory  dues, such as Provident Fund, E.S.I. and workers’ dues on  account of wages salary are to be liquidated in the manner as  provided therein and unsecured creditors were made entitled to  receive payment @ 2% per month save and except initial payment  @ 5%.  The said scheme was supported by the workers. Unlike  unsecured creditors, at no point of time workers had come up  before the company Judge or before this Court alleging that  payments have not been made to them pursuant to and in terms  of the scheme, though the workers all along appeared in the  proceedings.         In any event since the Company is functioning as a going  concern on and from the date of implementation of the Scheme of  Arrangement as formulated and approved by the High Court as  well this Court, the question of the workers at this stage when the  winding-up proceedings have been permanently stayed under  Section 466 of the Companies Act, 1956 to state to have a better

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claim by virtue of Section 529A of the Companies Act, 1956 does  not and cannot arise.  The workers having a priority over creditors  can come into play only the winding-up process is in motion and  the Official Liquidator take steps to formalize winding-up.  In the  instant case, after the Scheme had been sanctioned, the question  of winding-up would arise only if the order of permanent stay  granted was to be lifted on any party’s complaining of failure of  the Scheme or inability on the part of the Company to make  payments either in terms of the scheme or otherwise.  The  contention to the contrary raised by Mr. Nariman has no force.  Likewise, the reliance upon the provisions of the ESI and  the EPF Act are inapposite inasmuch as by virtue of orders of this  Court as also noted by the Division Bench of the High Court that  the amount to be paid at the rate of Rs. 8 lacs per month as  directed by this Court was to be kept secured for payment to un- secured creditors only, the workers are therefore estopped from  resorting to taking recourse to the provisions of Section 11(2) of  the EPF Act since the same was available to them even at the time  this Court had directed the said sum to be earmarked for  payments to un-secured creditors.  In view of the fact, that the manner in which the unsecured  creditors are entitled to receive the payment has been specified  and more particularly, when all the pre-scheme un-secured  creditors who have lodged their claims with the Registrar, High  Court, Calcutta have received payment, there cannot be a  justification in withholding the payment of the appellants and  petitioners who were also entitled to receive payment as other pre- scheme un-secured creditors.  In our view, the provisions as contained under section 529A  of the Companies Act, 1956 are not applicable in the facts and  circumstances of the case as the order of winding-up has been  stayed and the company is being run under the scheme as a  going concern.  One Committee of Management is being replaced by another  Committee of Management on the same terms and conditions  with an object to implement the same scheme.  Thus the dues of  the creditors including the workers and other statutory dues are  to be paid by the Committee of Management.  Even, at present the  company is being run by a committee of Management and are  now supported by the workers as would appear from the order  dated 18.11.2004.  This apart from the report of the Joint Special Officers  dated 20th August, as submitted by respondent No.4 before this  Court it would further appear that the present committee of  Management in implementation of the said scheme, is making  payments of arrears as well as current dues of the workers.  So far as the provision as contained under section 11 sub- clause 2 of the Employees Provident Fund & Miscellaneous  Provisions Act, 1952 are concerned, the same, in our opinion,  would not debar the appellants to receive their payments as the  appellants have been made entitled to receive the payments in  terms of the scheme and charge if any, would crystallize over the  assets of the company and not upon the money of the appellants.  It is interesting to notice that the workers on the one hand  are opposing the claim of the appellants on the ground that they  have not received the payment.  On the other hand, the workers  have not made any claim from the money which has been  received by the respondent No.4 as compensation approximately  to the tune of Rs.41 crores for acquisition of the land by the  National High-Way Authority of India for 17 acres valued at Rs.  41 crores reported in Competent Authority vs. Barangore Jute  Factory & Ors., (2005) 13 SCC 477.  Thus it is crystal clear that  the Workers’ Union have been set-up by the present committee of  management so as to obstruct the payment to these appellants.  In our considered opinion, the impugned judgment and

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order warrants interference by this Court under Article 136 of the  Constitution of India as the appellants have been wrongfully  excluded from receiving the payments though all other creditors  similar to the status of the appellants have received their payment  long back thus there has been denial of justice.     Insofar as the argument of Shri K.P. Bagaria, learned senior  counsel appearing on behalf of other Workers’ Union with regard  to the liability of making payments towards Provident fund dues  and the judgment reported in 1995 Volume I CLJ page 89, it is  not in dispute that the appellants were not parties to the  proceedings in which the said judgment was delivered, and it was  Mr. Raj Kumar Nemani who had been held to be liable by the  High Court to pay provident fund dues.  The liability to pay  Provident Fund dues remains with the company which is still run  a going concern.  Insofar as the outstanding amounts are concerned, these  very unions had sworn affidavits filed in July, 1993 before the  High Court stating that the Nemani group after taking over  management has paid substantial part of their dues.  Insofar as the scheme is concerned, the said scheme was  initially for a period of 8 years and the amounts mentioned  therein were to be liquidated over the years and not immediately  upon the scheme coming into force.  The payments which were to  be made immediately upon implementation of the scheme, were  accordingly made.  The petitioner group was replaced midway into  the scheme and did not complete the entire tenure of the scheme.   The new Committee of Management (Jain-Jalan) which replaced  the petitioner group, took over the management on the same  terms and conditions as contained in the scheme, thereby  assuming and/or taking over the entire responsibility of payment  of all outstanding amounts including workers dues and other  employee benefits including Provident Fund.  It is pertinent to note that the fund which is the subject- matter of the present proceedings was created only for the  purpose of payment of unsecured creditors under the scheme  framed by the High Court and accepted and affirmed by this  Court by two orders dated 17.12.1993 and 11.03.1994.  This  Court affirmed that the amount of Rs. 8 lacs per month out of the  revenues of the Company would be kept aside in the hands of the  Registrar, Original side and pay to the unsecured creditors alone  @ 2% per month.  Admittedly, the said corpus has been treated  by successive orders of this Court and the High Court as being  the dues of the unsecured creditors alone.  None of these orders  were ever appealed against or set aside.  It is too late in the day to  contend that the said fund would also be utilized for payment of  workers dues and or other statutory dues for which the scheme  made separate arrangements.  Both Jardine Henderson and Jain- Jalan Committee who were in management of this Company at  various points of time have been allowed to recover their entire  dues as unsecured creditors out of this fund without reference to  the workers dues and or other statutory dues.  At no stage,  whatsoever, have any part of the said fund been utilized by the  High Court for payment of any of the workers dues or other dues.   The said fund, in our opinion, therefore, cannot have a different  character merely when it comes to the dues of the present  petitioners.  It is important to note that by orders of Court, the company  (in liquidation) was not in fact wound up but was allowed to  continue as a going concern.  This was undoubtedly in the  interest of the workers.  So long as the company continued as a  going concern, the workers not only continued to get their wages  and other benefits and also retained their rights to be reimbursed  out of the assets of the Company in the event that the assets have  to be sold in winding up.  In fact, the fixed assets of the Company  are enormously valuable.  It has land in excess of 50 acres in

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prime locations out of which 17 acres was acquired by the  National High-way Authority upon payment of compensation of  Rs. 41 crores recently to the present Company.  The dues of  workers are, therefore, in no jeopardy whatsoever.  When the  Company continues as a going concern, it is the dues of the  unsecured creditors which are most vulnerable and it is for that  purpose this Court by its various orders ensured that a separate  fund should be created for the unsecured creditors.  In our  opinion, it is fair and proper that the funds so created should only  be utilized for the purpose of the unsecured creditors and not  workers dues and other dues.  It was contended by the respondent that for the purposes of  Sections 441 and 529A of the Companies Act, the phrase "in  winding up" should refer to "in the course of winding up".  In our  view, this cannot be the position because, if so, no part of the  fixed or movable or any other assets of the Company including  raw material and working capital can be alienated by the  Company in the usual course of its business activities only such  time as the winding up proceedings are permanently stayed.  This   would mean that no order could ever be made exploring the  possibility of running the Company as a going concern during the  pendency of the winding up proceedings.  Such an interpretation  would not only contrary to the interest of the workers and the  industry as a whole but would not be pragmatic and would be  contrary to long settled practice in the Company jurisdiction.   Many judgments were cited by counsel for the workers’  union.  None of the judgments cited on behalf of the workers’  union under Section 11(2) are applicable to the facts of the  present case.  These are cases where a dispute arose as to who  had first charge on the assets of the employer which is not at all  the issue arising in the present context.  It was argued that the  present petitioners (Niraj Trading Company Group) are  responsible for heavy outstanding which was specifically denied  by learned counsel for the petitioners as most mis-leading and  contrary to the provisions of the scheme itself.  Our attention was  also drawn to the findings recorded by learned single Judge that  despite such tall claims, the workers had not been able to provide  proof of the specific details claimed by them.  It was stated by  learned single Judge that except for certain bald statements the  objectors did not provide details in support of their allegation.  In  our view, dues under the many heads were not to be paid  personally by the Members of the Committee of the Management.   They would be paid out of the funds generated in the course of  carrying on business of the said Company.  If anything remained  unpaid,  the liability would pass on under the provisions of the  scheme itself to the Committee of Management which replace  them.  In the first instance, the Committee of Management was  taken over by the Jain-Jalan Group and it is now alleged that now  it is taken over by Chetan Choudhary.  Outstanding liabilities  under the scheme, therefore, remain the liability of the Company  and the subsequent Committees were also required to discharge  their liabilities under the Scheme.  In our view, it is a deliberate  attempt here to cast the entire liability under the Scheme on to  the Members of the Committee constituted under the present  petitioners in special leave petition Nos. 6257-58 so that the  subsequent Committees can avoid their responsibilities and  obligations under the scheme.  To take one example, if there is  any outstanding amount by way of Provident Fund, the same is  just as such charged on the compensation money realized by the  present Management.  The present Management in collusion with  the Union leaders are, therefore, necessitated in projecting that  the outstanding Provident Fund dues, if any, should come out of  the fund lying in the hands of the Registrar, Original side, rather  than out of the compensation money which has been realized by  the present Management at the time of acquisition of the fixed

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assets of the Company.  It is to be noted that only 25% of the  dues of the petitioner, as unsecured creditors, have been directed  to be released under the orders of the High Court.  These dues  relate back to 1987.  The present petitioners who were suppliers  of jute to this mill have been unable to realize their dues of 1987  till today whereas all other unsecured creditors have been able to  do so.  It is, therefore, just and proper that at least at the present  stage, the dues should not be held back any further.    In any event, it is crystal clear that finding of the Division  Bench of the High Court, that the claim of the appellants have not  been duly adjudicated is erroneous as claim of the appellants  have duly been adjudicated by the Registrar, High Court, Original  Side, with the help of the Chartered Accountant as would be  evident from Certificate dated 15th March, 2004 issued by the  Registrar. Thus, the said order dated 3.3.2004 passed by the  Division Bench as against these appellants is liable to be set  aside.  

For the foregoing reasons, we hold 1.      That the appellants in C.A.Nos. 4101-4103 of  2004 and the petitioners in S.L.P.(C) Nos. 6257  and 6250 of 2004 are entitled for payment  as pre- scheme unsecured creditors in view of the specific  directions given by this Court on 31.3.1994. 2.      That the Division Bench was not entitled to direct  readjudication of the claims which were already  adjudicated, contrary to its own orders dated  30.11.1998/1.12.1998. 3.      The fund lying with the Registrar, original side,  High Court of Calcutta was specially earmarked  for the pre-scheme unsecured creditors as defined  in the Scheme. 4.      Registrar of the High Court is directed to effect        payment immediately to both the creditors.   In the result, C.A.Nos. 4101-4103 of 2004 and S.L.P.) Nos.  6257-6258 of 2004 are allowed and the orders passed by the  Division Bench of the High Court which are impugned in these  appeals and petitions are set aside and the C.A.Nos. 5906 and   5907 of 2004 filed by Barangore Jute Factory and Bengal  Chatkal Mazdoor Union (CITU) shall stand dismissed.  However,  there shall be no order as to costs.         It is stated that both the appellants in C.A.Nos. 4101- 4103/2004 and petitioners in S.L.P.)Nos. 6257-6258 of 2004  have already furnished the bank guarantee and have received the  payment upon furnishing the requisite bank guarantee.  The  Registrar of the High Court is directed to release the bank  guarantee to the respective parties forthwith. The Company is directed to pay the other dues such as PF,  ESI, Welfare Fund, arrears of wages, gratuity, bonus etc. to the  workers depending upon the availability of the funds with it. The appeals and special leave petitions are disposed of  accordingly. No costs.