http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

CASE NO.: Review Petition (civil)  1193-1203 of 2001

PETITIONER: Textile Labour Association & Anr.

RESPONDENT: The Official Liquidator & Anr.

DATE OF JUDGMENT: 12/04/2004

BENCH: S. RAJENDRA BABU, DR. AR. LAKSHMANAN & G.P. MATHUR.

JUDGMENT: JUDGMENT

IN

I.A. NOS. 168-178 OF 1997

IN

CIVIL APPEAL NO. 8530-40 OF 1983

RAJENDRA BABU,   J.  :

       This Court in a set of appeals arising out of certain  orders made in a batch of writ petitions by a Division  Bench of High Court of Gujarat in Association of  Natural Gas Consuming Industries & Ors.  vs.  Oil  and Natural Gas Commission & Anr., (1983) 24 (2)  Gujarat Law Reports 1437, examined various aspects of  the matter in relation to price fixation and upheld the  prices fixed by the appellant and allowed the appeals.  However, during the pendency of the appeals in this  Court, the interim orders granted by the High Court  continued to be in operation and the respondents  received gas at Rs.1000/- per 1000M3.    

In I.A. No. 168-178 of 1997 filed by the Official  Liquidator appointed in respect of Ambica Mills Ltd. in  Civil Appeal No. 8540-40 of 1983, this Court on  17.10.1997 held as under :-

"All that is necessary to be said is that out of  the assets of the company under liquidation,   the dues of ONGC Ltd., are required to be  paid off first and the question of making any  payment to any other creditor can arise only  out of the surplus, if any, remaining after the  full dues of the ONGC Ltd. have been paid  off.  The High Court is, therefore, to proceed  with the matter in this manner. I.As stand  disposed of."

       The petitioners in these review petitions contend  that an application had been made before the High  Court of Gujarat in Company Application No. 143 of  1997 in Company Petition No. 121  in which the High  Court directed that the Official Liquidator should make  an application before this Court after impleading the  company concerned;  that pursuant thereto,  he filed  an application No. 168-178 seeking for permission to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

sell the immovable properties of the Company and to  disburse the sale proceeds in accordance with law;   that to this application none of the Unions of the  workmen or other workmen were impleaded as  respondents nor did the Official Liquidator in course of  his application raised any pleading regarding the  priority of disbursement of sale proceeds or application  of Sections 529 and 529-A of the Companies Act; that     Petitioner No. 1  before us is a labour Association  representing the workmen of Shri Ambica Mills Ltd. and   petitioner No. 2  is labour Union representing the  workmen of Ambica Tubes, a division of Shri Ambica  Mills Ltd.; that the workmen of these two  establishments have not received wages and  employment benefits amounting to more than Rs.  40  crores by their employer Shri Ambica Mills; that    on  15.4.1987 this Court had directed ONGC to supply gas  to its consumers subject to the undertaking that they  would not charge, encumber or alienate any of their  immovable assets without the leave of this Court; that  Company Petition No. 66 of 1988 was filed for winding  up of Shri Ambica Mills Ltd.;  that, however, during the  pendency of this petition, a reference under the Sick  Industrial Companies (Special Provisions) Act, 1985  was filed before the Board for Industrial and Financial  Reconstruction (’BIFR’ for short);  that BIFR forwarded  its opinion to this Court under Section 20 of the Sick  Industrial Companies (Special Provisions) Act, 1985 to  the effect that it was just and equitable that the  company should be wound up;  that the opinion of BIFR  was registered as Company Petition No. 121 of 1995  and winding up order came to be passed on 17.1.1997  on Company Petition No. 66 of 1998 with Petition No.  121 of 1995 and others.   The petitioners made claim of  the outstanding dues of the workmen of Shri Ambica  Mills and the Official Liquidator in this regard  communicated to the petitioners that he does not have  any funds at his disposal and even if the amounts are  realised out of sale of the assets he would not be in a  position to make any payment to anybody including the  workmen, except ONGC in view of the order made by  this Court in I.A. No. 168-178 in C.A. No. 8530-40 of  1983.  Similar letter was also sent to Vatva Industries  Mazdoor Sabha on 12.8.1989.   The Textile Labour  Association received that letter on 6.9.1999.  It is only  on coming to know from the Official Liquidator that the  workmen who are members of the petitioners’  association would not be able to get their dues,  they  sought for intervention in the matter.     

       The basic submission made before us is that the  review petitioners were not parties to the proceedings  before this Court and on the passing of the winding up  order on 17.1.1997  the provisions of the Companies  Act will come into force and will be effective in the light  of the decisions of this Court in UCO Bank vs.  Official  Liquidator, High Court, bombay & Anr.,  1994 (5)  SCC 1; Industrial Credit and Investment  Corporation of India Ltd. vs. Srinivas Agencies &  Ors., 1996 (4) SCC 165;   Allahabad Bank  vs.   Canara Bank & Anr.,   2000 (4) SCC 406,  and A.P.  State Financial Corporation vs. Official Liquidator,   2000 (7) SCC 291.   

       Shri Raju Ramachandran, learned Additional

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

Solicitor General appearing for ONGC in these review  petitions, submitted that there is inordinate delay on  the part of the review petitioners in approaching this  Court and, therefore, this Court should recall its order  condoning the delay in filing the review petitions.  In  this context, it is contended that the review petitioners  were aware of the proceedings pending before this  Court in the company proceedings in which they sought  for their participation and the High Court had directed  them to take appropriate steps in this Court and they  did not do so till October, 1999 and they filed review  application only in August 2001;  that, therefore,  these  review  petitions are not filed with due diligence.   

It is clear from the records that the order made by  the High Court of Gujarat in Company Application No.  193/95 had been filed by Vatva Industries Mazdoor  Sabha.  The Textile Association were not made a party  in these proceedings. No notice was given to them. The  Textile Association is a separate union of workmen and  had no knowledge of the proceedings with the High  Court of Gujarat in relation to Shri Ambica Mills filed by  Vatva Industries Mazdoor Sabha.  The participation of  the Vatva Industries Mazdoor Sabha in the High Court  of Gujarat was only for the purpose of disbursement of  amounts realised from the sale of the finished products  and for payment of wages since September 1994 and  bonus for 1994-95.  It is in these circumstances, it is  stated that a direction had been issued by the High  Court of Gujarat to the Official Liquidator to make an  application for impleading necessary parties and to  furnishing copies to them and the Official Liquidator did  not implead any of these parties. Therefore, no  negligence can be attributed to the writ petitioners in  these cases and, therefore, the order made condoning  the delay does not require any reconsideration.    

       It is next contended that inasmuch as mandamus  had been issued by this Court as to priority of claims in  the matter of payment that mandamus will prevail over  any law.     This Court examined the plenary powers of  this Court arising under Article 142 of the Constitution  of India in Supreme Court Bar Association vs.  Union of India & Anr.,  1998 (4) SCC 409 and held  that ’this Court in exercise of its power under Article  142 cannot ignore any substantive statutory provision  dealing with the subject and it is only a residury power,  supplementary and complementary to the powers  specifically conferred on this Court by statutes  exercisable to do complete justice between the parties  wherever it is just and equitable to do so.  It is  intended to prevent any obstruction to the stream of  justice’.  Though the order of this Court in respect of  which review is sought for may be read as having been  made pursuant to exercise of powers under Article 142  of the Constitution,  still the same will have to be read  in the light of the decision of this Court Supreme  Court Bar Association  vs. Union of India & Anr.  (supra).   

       The effect of Sections 529 and 529A is that the  workmen of the company become secured creditors by  operation of law to the extent of the workmen’s dues  provided there exists secured creditor by contract.   If

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

there is no secured creditor then the workmen of the  company become unsecured preferential creditors  under Section 529A to the extent of the workmen dues.  The purpose of Section 529A is to ensure that the  workmen should not be deprived of their legitimate  claims in the event of the liquidation of the company  and the assets of the company would remain charged  for the payment of the workers’ dues and such charge  will be pari passu with the charge of the secured  creditors.  There is no other statutory provision  overriding the claim of the secured creditors except  Section 529A.  This Section overrides preferential  claims under Section 530 also.    Under Section 529A  the dues of the workers and debts due to the secured  creditors are to be treated pari passu  and have to be  treated as prior to all other dues.     

       Therefore, the law is clear on the matter as held in  UCO Bank’s case that Section 529A will override all  other claims of other creditors even where a decree has  been passed by a court.

Therefore, claims, if any, of ONGC will have to be  worked out in accordance with Sections 529 and 529A  of the Companies Act as well. The contention advanced  on behalf of ONGC by Shri Raju Ramachandran that if a  mandamus had been issued, it will prevail over any law  is not tenable and is rejected.

       In the result, we make it clear that order made by  this Court on 17.10.1997 in I.A.No. 168-178/1997 in  Civil Appeal No. 8530-40/1983 will have to be read  subject to provisions of Sections 529 and 529A of the  Companies Act.            The review petitions stand allowed in the manner  stated above.