Trade unions can file winding up plea, rules high court

In a judgement that is bound to be much debated, the Nagpur bench of Bombay High Court has ruled that a trade union can be described as a "creditor" and can file a winding up petition against a company to recover employees dues.

Further, workmen have been put at a higher pedestal than other secured creditors and financial institutions who had lent money to the company concerned in case the company's assets are liquidated.

The winding up petition can be filed under Section 439 read with Sections 433 and 434 of the Companies Act, 1956.

The interpretation places an effective legal weapon in the hands of trade unions for recovering unpaid dues from the employer company.

The division bench comprising Justices F I Rebello and N A Britto, upset a settled view in this regard by way of a judgement of a single judge bench of former Justice R J Kochar in the Mumbai Labour Union Vs M/s Indo French Time Industries Limited (2002 (2) Mh. L. J. page 405) case. The judgement was delivered on August 31, 2003. The division bench here disagreed with Justice Kochar's view and overruled it.

The case pertained to a writ petition of Khandelwal Tube Mill Kamgar Sangh against the respondent company and other creditors. The case was sent back to the high court by the Supreme Court on August 5, 2004, for determining inter-se priority among the claimants.

A year back the high court had allowed the petitioner union to withdraw its writ petition and issued directions to the labour court to decide the application of the union under Section 33-C (2) of the Industrial Dispute Act within a stipulated period.

The court had observed that in case recovery certificate was issued, the collector should recover the amount bearing in mind that workers' dues have the priority over the claims of the secured creditor.

The directive was challenged through a special leave petition by the respondent, Punjab National Bank, before the Supreme Court. The special leave petition was disposed by the apex court and the case was referred back to the high court for adjudication on inter-se priority among claimants.

Out of the total sale proceeds of the company's assets to the tune of Rs 9.69 crore through an auction held by the collector on June 6 last, the court has directed the high court registrar to send a cheque of Rs 2,41,89,797 to the assistant commissioner of labour for disbursement to the mill's eligible workmen after proper identification. The amount is to be disbursed within a month.

This amount is towards unpaid wages for the period from April 1, 2003, to November 30, 2004, and December 1, 2004, to May 31, 2005. Now in terms of the ruling delivered by the court, the workmen would be able to move for winding up of the company.

The court has also directed the registrar to forward Rs 60,12,927 towards Khandelwal Brothers' provident fund account with SBI's Kanhan branch. A sum of Rs 85 lakh would be retained by the registrar towards the state government's claim of unpaid Sales Tax dues.

Punjab National Bank stands to collect over Rs 5 crore from the company. It has been asked to make a statement before the court by the next date of hearing. Three more properties of the mill "" two in Navi Mumbai and one in Nagpur "" have been directed to be sold by the respective collectors for enlarging the size of the amount available for disbursement.

Advocate Akshay Naik appeared for the petitioner-Union. AGP Anand Fulzele (State), Adv Harish Thakur (Khandelwal Brothers Ltd.) Adv Ashutosh Dharmadhikari (Bank) and Adv Sudhir Puranik (Intervenor) represented the respondents.