Shivanand Gaurishankar Baswanti vs Laxmi Vishnu Textile Mills & Ors

Article 226 of the Constitution. 2

FACTUAL BACKGROUND

3. The case has a chequered history and

with a view to appreciate the contentions

raised by the parties, the background is

required to be kept in view. Laxmi Vishnu

Textile Mills (`Company' for short)--respondent

No.1 herein was formerly known as Vishnu Cotton

Mills Ltd. It was registered on May 19, 1908

under the Indian Companies Act, 1873 (then in

force). It was operating through two cotton

textile mills, namely, (i) Laxmi Mill, and (ii)

Vishnu Mill. Somewhere in the year 1961, Laxmi

Mill was merged in Vishnu Mill and was given

the present name i.e. Laxmi Vishnu Textile

Mills Ltd. There were large number of workers

in the mill and there was considerable profit

in the business. By the passage of time,

however, the Company started incurring losses

and things turned worse in later eighties.

Proceedings under the Sick Industrial Companies 3

(Special Provisions) Act, 1985 (hereinafter

referred to `SICA') had been initiated. On

April 28, 1994, the Board of Industrial and

Financial Reconstruction, New Delhi (`BIFR' for

short) issued an order declaring the Company as

`sick unit' and in exercise of powers conferred

on it under Section 22A of the Act, it

restrained the promoters/management from

disposing or transferring its assets described

in the order without prior permission of the

Board. It was also stated that violation of the

order passed by the Board would be dealt with

under Section 33 of SICA.

4. It is also the case of the appellant

that without issuing notice and without

obtaining permission from the Appropriate

Authority as required under Sections 25-O and

25-N of the Industrial Disputes Act, 1947, the

management of the Company resorted to illegal

closure and lockout of the Company. Thus, from

February 28, 1995, the Company is illegally

closed.

4

5. According to the appellant, BIFR

considered the facts and circumstances of the

case in their entirety and on December 30, 1996

passed an order recording its satisfaction as

required by sub-section (1) of Section 20 of

the Act that it was not possible for the

Company to revive and it was just and equitable

that Company should be wound up. The opinion

was forwarded to the High Court of Judicature

at Bombay with a request that banks and

financial institutions may explore the

possibility of sale of the assets of the

Company. It was proposed to entrust the work of

sale of assets to State Bank of India (SBI),

the lead bank in the case. The Operative Agency

(OA), namely, IDBI was directed to hold a joint

meeting of all participating banks and

financial institutions and to furnish a

detailed report on sale of assets of the

Company through SBI latest by February 28,

1997.

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6. It may be stated at this stage that

SBI was one of the major creditors. It

initiated recovery proceedings against the

Company by filing Original Application No. 2638

of 1999 and got a decree from Debt Recovery

Tribunal (DRT)-1, Mumbai for a sum of Rs.84.39

crores with interest. Other financial

institutions had also initiated proceedings for

recovery of their dues. Receiver was appointed

by DRT-1, Mumbai, who took possession of the

properties of the Company. Steps were also

taken to protect properties by employing police

force. The Receiver also met representatives of

Rashtriya Girni Kamgar Sangh, recognized Union--

respondent No.8 herein. The Receiver was in

possession of the property except those

properties which were occupied by the employees

who were in service of the Company and were

residing in the quarters provided to them while

they were in employment. Possession of the

machinery and other movable properties of the

Company was also taken over. Since the dues of 6

workers were neither settled nor paid, several

workers approached Controlling Authority under

the Payment of Gratuity Act, 1972 for gratuity.

Orders were passed in their favour directing

the Company to pay full amount of gratuity with

interest thereon. The said amount was also not

paid. Meanwhile, Trans Asia Global Company--

respondent No.7 expressed its desire to

purchase the property. According to the

appellant, respondent No.8--Union had no

authority to represent the interests of workers

of respondent No.1--Company and yet on March 8,

2005, it purportedly entered into a tripartite

agreement with respondent No.1--Company,

respondent No.8--Union and respondent No.7-M/s

Trans Asia Global Company. Respondent No.1-

Company under the tripartite agreement sold the

property to respondent No.7 for Rs.46.65

crores. The claim of the workmen was settled at

Rs.22.21 crores whereas in fact, the claim of

the workmen was more than Rs.132 crores. The

purported agreement never brought to the notice 7

of the workmen and they were kept in complete

dark. The property of the Company was worth

Rs.250 crores which could have satisfied claims

of SBI, legitimate dues of the workmen as also

of financial institutions and other creditors.

According to the appellant, the other agreement

was also entered into between secured and

unsecured creditors, labour representatives,

the Company and the purchaser on April 20,

2005. The agreement states that all secured

creditors, unsecured creditors and

representatives of the workmen had a meeting

and they all agreed on One Time Settlement

(OTS) and accepted the scheme of selling the

entire property by a private treaty to

respondent No.7 and accordingly the property

was sold. The action, however, was totally

illegal, uncalled for and in contravention of

various provisions of law.

PIL WRIT PETITION 8

7. According to the appellant, as soon as

he came to know about the above agreements,

sale of property by private negotiations and

without taking workers in confidence, he

submitted a representation to the Chief Justice

of High Court of Bombay pointing out several

illegalities committed by respondent No.1--

Company in not settling the dues of workmen.

The representation was converted into Public

Interest Litigation (PIL) and was registered as

PIL Writ Petition No. 126 of 2005. The

appellant herein filed an affidavit in the said

petition on June 27, 2006. The writ petition

came up for hearing before a Division Bench of

the High Court on July 13, 2006 and after

hearing learned counsel for the parties, the

writ petition was disposed of by the Court

observing that the grievance of the workers

could be redressed before `appropriate forum'.

The complaint against sale of property by

private treaty also could be adjudicated in

`proper proceedings' and the controversy did 9

not deserve to be taken into PIL. Liberty,

however, was granted by the Court to all

aggrieved parties to pursue `appropriate

remedy' for redressal of their grievances.

PRESENT WRIT PETITION

8. The appellant, thereafter, filed

present Writ Petition No. 5664 of 2006 in the

High Court of Bombay under Article 226 of the

Constitution and prayed for a writ of

certiorari or any other appropriate writ,

direction or order quashing all the actions in

the matter of recovery proceedings before the

Recovery Officer, Mumbai Debt Recovery Tribunal

No.1 and by examining the validity, propriety

and correctness of such proceedings and to

quash and set aside order of sale of properties

--movable and immovable--of respondent No.1--

Company in favour of respondent No.7. A writ of

mandamus was sought directing DRT-1, Mumbai not

to disburse any amount to anyone till the

claims of the workers have been properly 1

adjudicated and the amount paid. A prayer was

made to continue to employ all workers till

their services are legally terminated or till

lawful closure is effected. Interim relief was

also prayed.

ORDER OF HIGH COURT

9. The High Court, as observed above,

dismissed the writ petition observing that it

was not a fit case to interfere with by an

order dated February 12, 2007 in exercise of

extraordinary jurisdiction under Article 226 of

the Constitution. The said order is challenged

by the appellant in this appeal.

10. Notice was issued by this Court on

September 7, 2007 and meanwhile order passed by

DRT was stayed. Affidavits and further

affidavits were thereafter filed by the

parties. The Registry was directed to place the

matter for final disposal and that is how the

matter is before us.

11. We have heard learned counsel for the

parties.

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APPELLANT'S SUBMISSIONS

12. Learned counsel for the appellant

contended that all orders passed and actions

taken by the Authorities are unlawful, illegal

and contrary to law. It was submitted that the

first respondent-Company had resorted to

illegal closure and unlawful lockout due to

which workers had suffered a lot. It was also

submitted that when proceedings had been

initiated under SICA and an order was passed by

BIFR restraining the management of the 1st

respondent-Company from transferring,

alienating or disposing its property, no action

could have been taken for sale of the property.

Apart from the fact that such action is illegal

and in violation of the order passed by BIFR,

it is also contrary to law and is punishable

under Section 33 of SICA. A grievance was also

made that though there were several secured and

unsecured creditors and more than 4,000

workers, whose dues had not been paid, they

were never taken in confidence and private 1

settlement had been arrived at. Such action

could not be said to be legal or in consonance

with law. Moreover, the property of the 1st

respondent-Company which is worth more than

Rs.250 crores had been sold away by a `throw

away' price of less than Rs.50 crores. It has

prejudicially affected the interest of families

of thousands of workers who would have

otherwise got their legitimate dues but for the

illegal settlement by `interested' persons.

According to the appellant, most of the workers

were not in favour of so called settlement of

acceptance of an amount of Rs.22.21 crores

towards full and final settlement of their dues

when they were actually entitled to six times

more the said amount. Respondent No.7 could not

have represented all the workers and entered

into such settlement by accepting less than 20%

of their dues. According to the appellant, most

of the workers have objection against such

settlement and they have supported the

appellant and several employees had expressed 1

their opinion in writing to that effect. The

appellant had stated that when he came to know

about the decree passed by DRT and execution

proceedings in pursuance of the said decree and

sale of property, he drew the attention of the

Hon'ble Chief Justice of High Court of Bombay

by making a representation which was treated as

PIL Writ Petition. The High Court ought to have

granted relief in that proceeding. The High

Court, however, disposed of the writ-petition

by granting liberty to the parties to take

appropriate proceedings in accordance with law.

The appellant, therefore, filed fresh petition

but the High Court by a `cryptic' order,

dismissed the same without entering into the

merits of the matter. It was, therefore,

submitted by the appellant that the impugned

order passed by the High Court deserves to be

set aside quashing and setting aside the order

of sale in favour of respondent No.7 and by

directing the authorities to decide the matter

afresh in accordance with law.

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RESPONDENTS' SUBMISSIONS

13. The contesting respondents, on the

other hand, strongly urged that the appeal

deserves to be dismissed and no interference by

this Court is called for. The appellant has no

locus standi to file a petition either in the

High Court or to prefer an appeal in this

Court. It was contended that respondent No.1--

Company was in continuous loss since several

years and in the year 1995, it was closed down.

Crores of rupees were required to be paid to

State Bank of India, other financial

institutions as also to workers. Proceedings

had been initiated under SICA and BIFR was

satisfied that the Company could not be revived

and it favoured winding up of the Compny. A

decree was passed in favour of SBI by DRT-1,

Mumbai for substantial amount of more than

Rs.80 crores with interest. Over and above the

said amount, there were other secured and

unsecured creditors. Moreover, outstanding dues 1

of workers were also there. Movable and

immovable property of the Company was not

enough to clear up all the dues. It was,

therefore, felt that a fair settlement could be

arrived at so that all the parties could get an

equitable share and proper and reasonable

amount from the property owned and possessed by

respondent No.1-Company. It is in the light of

the above facts that the parties i.e., (i)

Company; (ii) Secured and unsecured creditors;

and (iii) Union sat together, discussed the

problem and settled the matter. SBI which was

having a decree for Rs.84 crores with interest

thereon, agreed to let go substantial part of

the amount so that workers may not be

prejudicially affected. Other creditors also

adopted positive and constructive attitude. The

Union considered the fate of families of

several workers and in the capacity of

`Representative Union' under the Bombay

Industrial Relations Act, 1946 exercised the

power and agreed to the settlement. In fact, it 1

was the case of respondent No.7-Union that

during the intervening period of about one

decade after the closure of the Mills in 1995,

about 400 workers died. If settlement would not

have been arrived at, it would have resulted

into further agony to the remaining workers and

their families as also the families of those

workers who lost their lives during the

pendency of proceedings. It was in these

circumstances that the best solution had been

thought by way of settlement and no fault can

be found against Representative Union in

agreeing to such settlement.

14. It was also submitted that under the

Act of 1946, it is the Representative Union

which alone has exclusive right in any industry

to represent the entire class of workmen in the

local area. The appellant had no locus or

standing to agitate grievance or raise dispute

on behalf of workers/labourers. But, even

otherwise, a representation which was treated

as PIL Writ Petition was dismissed by the High 1

Court and that order had never been challenged

by the appellant by approaching this Court and

the decision had become final. It was contended

that from the order of the Court it was very

clear that liberty was granted to aggrieved

parties to take appropriate remedy, in

appropriate forum in appropriate proceedings.

The appellant, however, neither approached

Labour Forum nor went to Debt Recovery

Appellate Tribunal but filed a fresh writ-

petition. Obviously, the subsequent petition in

which the impugned order is passed was not PIL

as it was registered as Writ Petition

instituted by an individual. The High Court

was, therefore, wholly right and fully

justified in dismissing the said petition in

limine, particularly in the light of the order

passed in previous PIL Writ Petition.

15. It was submitted that the situation

today is irreversible inasmuch as after the

settlement had been arrived at between the

parties, the purchaser-respondent No.7 had 1

deposited the entire purchase price with DRT.

The secured creditors as well as labourers were

paid their dues as per the said settlement and

their respective shares. Creditors had issued

`discharge certificates'. The Assistant Labour

Commissioner had disbursed the amount to the

workers and their family members who are more

than four thousand. The appellant who was also

one of the workers was paid more than

Rs.60,000/- and he issued a receipt in token of

acceptance of the said amount. The order of

sale in favour of respondent No.7 was confirmed

by DRT and the sale became final. Sale

certificate was also issued in favour of the

purchaser. It had also paid an amount of

Rs.2.25 crores towards stamp duty and got the

property registered in its name. All those

orders were never challenged by the appellant

by taking `appropriate proceedings'. If at this

stage, this Court interferes and sets aside the

orders passed by the authorities from time to

time, irreparable injury and loss would be 1

caused not only to the purchaser-respondent

No.7, but to other respondents as well. For

instance, it would be very difficult for the

workers who had received the amount to refund

or pay back the said amount which would be the

direct consequence. It would be difficult for

respondent No.7 also if it will not be able to

recover the amount which it has paid. Moreover,

no secured or unsecured creditor has come

forward and has made a complaint to this Court

that though he was entitled to a particular

amount, he had not been paid and he has

grievance against the settlement. The appellant

who is only one person and has received his

dues, has approached the High Court under

Article 226 of the Constitution after dismissal

of Public Interest Litigation and it is he who

contends that several creditors have not been

paid their dues and workers have also suffered

and the settlement should be set aside. It was

submitted that the High Court was right in not

entertaining such petition and this Court, in 2

exercise of power under Article 136 of the

Constitution, may not interfere with the said

order.

CONSIDERATION OF RIVAL CONTENTIONS

16. Having heard the learned counsel for

the parties and having gone through the records

and proceedings of the case, in our opinion,

this is not a fit case for exercise of

discretionary and equitable jurisdiction under

Article 136 of the Constitution.

17. It is clear that so far as the present

proceedings are concerned, they are not in the

nature of por bono publico. The appellant

herein had made representation to the Hon'ble

Chief Justice of High Court of Judicature at

Bombay earlier which was treated as Writ

Petition (PIL) and the petition was disposed of

by the Court granting liberty to the aggrieved

parties to approach appropriate forum in

appropriate proceeding without granting any

relief. Prima facie, therefore, in our 2

opinion, the contention of the contesting

respondents is well-founded that if the

appellant herein was aggrieved by certain

orders passed by Debt Recovery Tribunal (DRT)-

I, Mumbai, he ought to have approached Debt

Recovery Appellate Tribunal (DRAT) by filing

appeals against those orders. If he had

grievance against the Company or inaction on

the part of the Authorities under Labour Laws

on the ground that they had not protected the

interests of workers of Laxmi Vishnu Textile

Mills, he ought to have approached Labour

Forum. The appellant, however, did neither.

As soon as the PIL Writ Petition was disposed

of, within few days, he filed another writ

petition in his individual capacity. The High

Court, in our opinion, therefore, was right in

dismissing it in limine by passing the impugned

order that it was not a fit case to exercise

extraordinary jurisdiction under Article 226 of

the Constitution.

MERITS OF THE MATTER 2

18. On merits also, we find no substance

in the contention raised by the learned counsel

for the appellant. From the record, it is

clear that from eighties the respondent No. 1-

Company was in financial doldrums. Day-by-day,

the position deteriorated and it had incurred

heavy losses. So much so that the Mill was

required to be closed down somewhere in 1995.

Admittedly, after February, 1995, the Company

has never revived. It is also clear from the

record that substantial amount was due and

payable by the Company to State Bank of India,

several other financial institutions, secured

and unsecured creditors and to workers.

Proceedings had been initiated under SICA. BIFR

had passed orders from time to time and finally

it recommended winding up of the Company on

being satisfied that rehabilitation of the

Company was not possible. A recommendation was,

therefore, made and papers were forwarded to

the High Court concerned, i.e. the High Court

of Judicature at Bombay. It is further clear 2

that in favour of one major creditors, i.e.

State Bank of India a decree was passed by DRT-

I, Mumbai for Rs.84.39 crores with interest

thereon. It has been brought on record that

several other financial institutions had

approached DRT and either orders were passed in

their favour or proceedings were pending. It

is brought to our notice that many workers had

gone to Controlling Authority under the Payment

of Gratuity Act, 1972 and obtained orders in

their favour directing the first respondent

Company to pay gratuity with interest thereon.

The Company was not in a position to pay entire

dues. In the circumstances, DRT-I, Mumbai

ordered to take appropriate steps so that joint

meeting of all financial institutions and

representatives of workers be held and the

matter could be settled. Meanwhile, respondent

No. 7-Trans Asia Global Trade expressed its

desire to purchase the property. On March 8,

2005, a tripartite agreement had been arrived

at between respondent No. 1-Company, 2

representatives of respondent No.8-Union of

workers and Trans Asia Global Trade-intending

purchaser. In the agreement it was stated that

the Company had huge liability and there were

several secured creditors. The property owned

by the Company was not enough to meet with all

liabilities. The representatives of respondent

No.8 Union were aware of the said fact and

agreed to accept amount of Rs.22.21 crores

towards full and final settlement of dues of

workers. Respondent No. 7 decided to purchase

the property for Rs.46.65 crores. The

agreement was executed on March 8, 2005 and

signed by all the three parties to the

agreement, i.e. by the Mill-Company, by the

purchaser of property and also by

representatives of respondent No.8 Union. A

joint meeting of secured and unsecured

creditors was also held on April 20, 2005

wherein secured and unsecured creditors of the

first respondent-Company agreed to share sale

proceeds of Rs.46.65 crores by accepting and 2

finalizing One Time Settlement (OTS). Final

decision was taken on the basis of the

agreement arrived at earlier on March 8, 2005.

It was decided to sell the property to

respondent No.7 for Rs.46.65 crores. The amount

which was to be paid as per the final agreement

came as under;

Institutions/B Principa Rs. (in anks/ l O/S Crore) Labour On Proposed 31.3.199 share 9 SBI 28.05 14.02 IDBI 4.08 2.04 ICICI 1.24 0.61

IFCI 1.28 0.63 IIBI 1.54 0.76 Labour 22.21 Bank of 1.50 0.50 Maharashtra MSEB 5.37 4.00

Sales Tax 0.99 Solapur 0.89 Municipal Corporation and Octroi GRAND TOTAL 46.65

19. On October 6, 2005, an order was

passed by Recovery Officer, DRT-I, Mumbai in 2

which all the above facts had been stated. The

Recovery Officer referred to tripartite

agreement and payment of amount to creditors

and workers. The order also recited that as per

the direction of the High Court, the workers'

claim was to be adjudicated by DRT. The

applicant Bank was, therefore, directed to

issue advertisement and invite workmen as per

the guidelines formulated by DRT. All the

workers were directed to lodge their claims in

appropriate format in the Tribunal and all such

claims were ordered to be placed before the

Presiding Officer for adjudication.

20. Regarding valuation of property, it

was stated;

"Since the valuation was done in the year 2002, before considering the proposal, the property was valued again from the approved valuer from the panel of DRT. According to the valuation report, offer of the purchaser is above the distress valuation price".

21. It was mentioned that the Tribunal

accepted the offer of M/s Trans Asia Global 2

Trade for purchasing movable and immovable

property of the Company in the custody of

Receiver appointed by DRT for an amount of

Rs.47.82 crores. The auction-purchaser had

deposited the amount of Rs.47,81,57,777 towards

sale consideration and other expenses. The

recovery officer directed the purchaser to pay

balance amount. The matter was adjourned for

confirmation of sale. An order was passed to

send report to BIFR after confirmation of sale.

The above order has not been challenged by the

appellant in accordance with the provisions of

1993 Act.

22. On December 6, 2005, again, the matter

was placed before the Recovery Officer, DRT-I,

Mumbai. Reference was made to all proceedings,

settlement arrived at between the parties and

sale of property for Rs.47.82 crores. It was

noted that no objection had been received from

any person under Rule 60, 61 or 62 of the

Second Schedule to the Income Tax Act, 1961 for

setting aside sale and the sale was required to 2

be confirmed. Accordingly, the sale was

confirmed. Even this order was not challenged

under the Act.

23. On January 20, 2006, the Recovery

Officer, DRT-I, Mumbai issued a sale

certificate for immovable property for Rs.45

crores in favour of respondent No.7-Purchaser.

Another certificate of sale for movable

properties for Rs.2.82 crores was issued by

DRT. Those orders have remained unchallenged

except in the present proceedings.

24. The learned counsel for the appellant

strenuously urged that on April 28, 1994, BIFR

had issued interim order restraining the first

respondent-Company from alienating,

transferring or disposing the property of the

Company without prior permission of the Board.

It was stated that if any action would be taken

in violation of the said order, it would be

punishable under Section 33 of SICA. In view of

the said order, neither the property could have

been sold without the prior permission of BIFR 2

nor such sale could have been confirmed. It

was also urged that even under 1993 Act,

Recovery Officer could not have permitted or

confirmed sale and it could have been done only

by the Debt Recovery Tribunal. Hence, all

proceedings were non est and are required to be

ignored altogether.

25. The learned counsel for the contesting

respondents, on the other hand, submitted that

the order passed by BIFR was merely an interim

order and in 1996, it directed winding up of

the Company and forwarded its opinion to the

High Court. Moreover, no such point had been

taken by the appellant earlier. As discussed

above, even prior to the present petition which

had been filed by the appellant-herein in the

High Court under Article 226 of the

Constitution, he had submitted a representation

to the Chief Justice which was registered as

PIL Writ Petition. No such contention was taken

in that petition. Even in the present

proceedings, what was contended by the 3

appellant before the High Court was as regards

a transaction under which property was sold by

Chairman of the first respondent-Company Mr.

M.L. Apte through his constituted Attorney

Kantilal Shankarlal Shah. Nothing was stated

as to other properties.

26. But even on merits, the impugned

action calls for no interference. The order

dated April 28, 1994 passed by BIFR reads as

under;

"Whereas a draft scheme for rehabilitation of M/s Laxmi Vishnu Textile Mills has been prepared, circulated and published by the Board under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1935 in pursuance of its proceedings held/orders face in the case on 14.2.1994.

And whereas, the Board is of the opinion that in the interest of rehabilitation of the sick industrial company, creditors, shareholders as also in public interest, it is necessary to direct the existing promoters/management of sick industrial company; M/s Laxmi Vishnu Textile Mills not to disposed of, except with the consent of the Board, any of its fixed and other assets charged/hypothecated to the financial institutions, banks and other 3

creditors, the board, in exercise of powers conferred on it by Section 22A of the Sick Industrial Companies (Special Provisions) Act, 1985 hereby directs the existing promoters/ management is invited to the provisions of Section 33, where under violation of any of the orders of the Board is punishable in the manner laid down therein".

27. Plain reading of the order makes it

clear that the Board was of the opinion that in

the interest of rehabilitation of the sick

industrial company, its creditors, shareholders

as also in public interest, certain directions

were necessary. The Company was, therefore,

restrained from disposing the property which

was charged /hypothecated to financial

institutions. The submission of the learned

counsel for the contesting respondents is that

there was no question of revival of the Company

in view of order passed by BIFR in 1996 and its

recommendation for winding up of the Company.

Regarding interests of creditors and other

persons, it was stated that in March, 2005,

tripartite agreement had been arrived at 3

wherein representatives of labour Union, first

respondent-Mill Company and the purchaser were

present and the agreement was signed by all of

them. Likewise, in April, 2005, joint meeting

of secured and unsecured creditors,

representatives of Union and vendor and vendee

was held and all of them agreed for OTS and

expressed their willingness to accept lesser

amount. In the circumstances, charge imposed

and prohibition issued by BIFR on the Company

no more remained operative. On October 6, 2005,

therefore, it was observed by the Recovery

Officer of DRT-I, Mumbai to send information to

BIFR after confirmation of sale. Consequential

action of confirmation of sale was thereafter

taken on December 6, 2005 and sale certificate

was also issued on January 20, 2006. All the

actions were taken only after March/April 2005.

They, therefore, could not be said to be

contrary to law or in violation of the order

passed by BIFR.

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28. Even otherwise, on the facts and in

the circumstances of the case, we are fully

satisfied that had the agreements in question

not been arrived at, all parties including

workers for whom great concern had been shown

by the appellant would have suffered. In fact,

in an affidavit filed on behalf of the State

Bank of India, it was stated that in the light

of the decree passed in favour of State Bank of

India by DRT-I, Mumbai, the Bank would be

entitled to Rs.222.34 crores. Similarly, other

institutions were also entitled to substantial

amount. It was because of conjoint and combined

efforts of all the parties that agreements

could be arrived at. It was stated that a

Cabinet Minister used his good offices and One

Time Settlement (OTS) had been arrived with

Banks and financial institutions and workmen

were able to get the amount which had not been

paid to them for many years. The contention

that secured and unsecured creditors and 3

workers have not received their dues has no

force.

29. Again, who has approached this Court?

Neither a secured nor an unsecured creditor.

Nor a representative of a labour union. Nor

even a person acting pro bono publico. As

already adverted to earlier, PIL Writ Petition

at the instance of the appellant was dismissed

by the High Court and the said decision was

never challenged by him. Here is an employee

who is also one of the workers, who has been

paid his dues. He accepted the amount of

Rs.62,555/- and issued `No Objection

Certificate' (No Dues Certificate) -no doubt by

putting an endorsement "Accepted under

Protest". He has urged that the workmen have

not been paid their dues and injustice had been

done to them. To us, even there, the appellant

is not right. A Representative Union has taken

a decision which is binding on all employees.

That aspect, however, we will deal with at a

later stage.

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30. The learned counsel strongly relied

upon a decision of this Court in NGEF Ltd. v.

Chandra Developers (P) Ltd., (2005) 8 SCC 219.

In that case, this Court held that the

provisions of SICA would prevail over the

provisions of the Companies Act since it is a

special statute and a `complete code' in

itself. The Court also held that the

jurisdiction of the Company Court in the

matters relating to winding up of a sick

Company would arise only when BIFR or AAIFR

exercises its jurisdiction under Section 20 of

SICA recommending the winding up of the Company

upon arriving at a finding that there does not

exist any chance of revival of the Company.

Referring to Gray's Inn Construction Co. Ltd.,

Re, (1980) 1 All ER 814 : (1980) 1 WLR 711 and

Pankaj Mehra v. State of Maharashtra, (2000) 2

SCC 756, however, the Court observed that

"disposition of assets during the interregnum

may not be irretrievably void but the courts 3

are required to exercise power with caution and

circumspection".

STATUS AND POSITION OF REPRESENTATIVE UNION

31. The learned counsel for the appellant

contended that respondent No. 8 could not have

agreed to accept a meager amount of Rs.22

crores when the outstanding dues were more than

Rs.130 crores. It was also stated that majority

of workers are with the appellant and they are

opposed to the settlement. Thousands of workers

have so stated in writing and informed the

appellant that the grievance raised by the

appellant is well-founded and they are entitled

to much more amount than what had been paid

under the settlement.

32. Even this contention has no force.

The learned counsel for the Union, in our

opinion, is right in submitting that under the

Bombay Industrial Relations Act, 1946, it is

the `Representative Union' which has all powers

to enter into a settlement on behalf of workers 3

in the industry and it is only that Union which

can take a decision under 1946 Act. The said

decision would bind not only the members of the

Union, but also to those workers who are not

members of such Union.

33. The learned counsel, in this

connection, invited our attention to various

provisions of 1946 Act. As the Preamble of the

Act declares, the Act has been enacted "to

regulate the relations of employers and

employees, to make provision for settlement of

industrial disputes and to provide for certain

other purposes". The Act contains elaborate

provisions for registration of Unions and their

powers.

34. Section 2 defines various terms.

Chapter II deals with Authorities constituted

or appointed under the Act. Chapter III

provides for registration of Unions. Chapter IV

relates to Approved Unions. Chapter V titles

"Representatives of Employers and Employees,

and appearance on their behalf". 3

35. Section 27 enables the State

Government to recognize any combination of

employers as Association of Employers in an

industry in any local area and to represent an

employer in any proceeding under the Act.

Section 27A correspondingly provides for

appearance on behalf of employees. It is,

however, in negative terms and enacts that save

as provided in certain cases (Sections 32 and

33), "no employee shall be allowed to appear or

act in any proceeding under this Act except

through the representative of employees". The

section thus puts an embargo on appearance of

any employee except through the representative

of employees.

36. Section 14 empowers Registrar to

register a `Representative Union' for any

`Industry' in any `Local Area'. It is thus

clear that there can be only one Representative

Union for one Industry in one Local Area.

Section 30 enumerates representatives of

employees and provides for order of preference 3

in which such representatives are allowed to

appear or act in any `Industry' in any `Local

Area'. It reads thus;

30. Representative of employees Subject to the provisions of section 33A, the following shall be entitled to appear or act] in the order of preference specified as the representative of employees in an industry in any local area-

(i) a Representative Union for such industry;

(ii) a Qualified or Primary union of which the majority of employees directly affected by the change concerned are members;

(iii) any Qualified or Primary Union in respect of such industry authorised in the prescribed manner in that behalf by the employees concerned;

(iv) the Labour Officer if authorised by the employees concerned;

(v) the persons elected by the employees in accordance with the provisions of section 28 or where the proviso to sub-section (1) thereof applies, the employees themselves;

4

(vi) the Labour Officer:

Provided -

Firstly, that the persons entitled to appear or act under clause (v) may authorise any Qualified or Primary Union in respect of such industry to appear or act instead of them;

Secondly, that where the Labour Officer is the representative of the employees, he shall not enter into any agreement under section 44 or settlement under section 58 unless the terms of such agreement or settlement, as the case may be, are accepted by them in the prescribed manner;

Thirdly, where in any proceeding the persons entitled to appear or act under clause (v) are more than five, the prescribed number elected from amongst them in the prescribed manner shall be entitled to appear or act instead.

37. It is thus clear that Representative

Union is having priority and `preference' over

other Unions to appear on behalf of employees

of such industry in the area. Section 42 in

Chapter VIII provides for change and lays down

procedure for such change. It reads; 4

42. Notice of change (1) Any employer intending to effect any change in respect of an industrial matter specified in Schedule II shall give notice of such intention in the prescribed form to the representative of employees. He shall send a copy of such notice to the Chief Conciliator, the Conciliator for the industry concerned for the local area, the Registrar, the Labour Officer and such other person as may be prescribed. He shall also affix copy of such notice at a conspicuous place on the premises where the employees affected by the change are employed for work and at such other place as may be directed by the Chief Conciliator in any particulars case.

(2) Any employee desiring a change in respect of an industrial matter not specified in Schedule I or III give a notice in the prescribed form to the employer through the representatives of employees, who shall forward a copy of the notice to the Chief Conciliator, the Conciliator for the industry concerned for the local area, the Registrar, the Labour Officer and such other person as may be prescribed.

(3) When no settlement is arrived at in any conciliation proceeding in regard to any industrial dispute which has arisen in consequence of a notice relating to any change given 4

under sub-section (1) or sub-section (2), no fresh notice with regard to the same change or a change similar in all material particulars shall be given before the expiry of two months from the date of the completion of the proceeding within the meaning of section 63. If at any time after the expiry of the said period of two months, any employer or employee again desires the same change or a change similar in all material particulars, they shall give fresh notice in the manner provided in sub-section (1) or (2), as the case may be.

(4) Any employee or a representative union] desiring a change in respect of (i) any order passed by the employer under standing orders, or

(ii) any industrial matter arising out of the application or interpretation of standing orders, or (iii) an industrial matter specified in Schedule III, except item (5) thereof shall make an application to the Labour Court and as respects change desired in any industrial matter specified in item 5 of Schedule III, to the Industrial Court:

Provided that no such application shall lie unless the employee or a representative union has in the prescribed manner approached the employer with a request for the change and no agreement has been arrived at in respect of the change within the prescribed period.

4 38. The aforesaid provisions came up for

consideration before this Court in Girja

Shankar Kashi Ram v. Gujarat Spinning &

Weaving Co. Ltd., (1962) Supp 2 SCR 890. In

that case, `G' closed its business and sold its

assets to `T'. The old company discharged all

its workmen when it closed the business. The

new company re-started the business and

employed all the workmen of the old company.

At the time of closure of `G', a dispute was

pending between the company and its workmen

with respect to bonus. A `Representative

Union' of the Textile Workers in the city of

Ahmedabad filed an application before the

Labour Appellate Tribunal wherein the dispute

was pending and the matter was sub-judice. The

matter was compromised and `G' consented to pay

agreed bonus. The Representative Union accepted

the amount and gave an undertaking not to claim

compensation in future. Later on, however,

about 400 employees issued a notice and claimed

compensation for closure. The Representative 4

Union appeared before the Labour Court and

contended that the application was liable to be

dismissed in view of the compromise arrived at

between the Mill Company and Representative

Union. The Labour Court upheld the objection

and dismissed the application. The order was

confirmed by Industrial Court in appeal as well

as by the High Court in a petition under

Article 227. The employees approached this

Court.

39. This Court considered the relevant

provisions of the 1946 Act, the object

underlying conferment of power on

Representative Union and the action taken by it

and held that when a Representative Union

appears in any proceeding under the Act, none

else can be allowed to appear not even the

employee at whose instance proceedings might

have been started under Section 42(4) of the

Act. The Court held that if the Representative

Union appears, the decision taken by that Union

would be final and binding.

4

40. Explaining the scheme of the Act, the

Court stated;

"It will be seen that s. 27A provides that no employee shall be allowed to appear or act in any proceeding under the Act, except through the representative of employees, the only exception to this being the provisions of Sections 32 and 33. Therefore, this section completely bans the appearance of an employee or of any one on his behalf in any proceeding after it has once commenced except through the representative of employees. The only exceptions to this complete ban are to be found in Sections 32 and 33; to which we shall presently refer. But it is clear that bona fides or mala fides of the representative of employees can have nothing to do with the ban placed by Section 27A on the appearance of any one else except the representative of employees as defined in Section 30 and that if anyone else can appear in any proceeding we must find a provisions in that behalf in either Section 32 or Section 33 which are the only exception to Section 27A. It may be noticed that there is no exception in Section 27A in favour of the employee, who might have made an application under Section 42(4), to appear on his own behalf and the ban which is placed by Section 27A will apply equally to such an employee. In order however to soften the rigour of the provisions of Section 27A, for it may well be that the representative of employees may not choose to appear in many proceedings started by an 4

employee under s. 42(4), exceptions are provided in ss. 32 and 33. The scheme of these three provisions clearly is that if the Representative Union appears, no one else can appear and carry on a proceeding, even if it be begun on an application under s. 42 (4) but where the Representative Union does not choose to appear there are provisions in ss. 32 and 33 which permit others to appear in proceedings under the Act.

Section 32 gives power to a conciliator, a board, a wage board, a labour court and the industrial court to permit an individual, whether an employee or not, to appear in any proceeding before him or it. This shows that the complete ban imposed by s. 27A can be removed if the authorities under the Act think it expedient to permit another person to appear and that person may be an employee or not. Thus the employee who has made an application under s. 42(4) may be permitted to appear before the authorities under the Act; but this provision is subject to a proviso namely that no such individual which would include an employee who has himself made an application under s.

42(4), shall be permitted to appear in any proceeding in which the Representative Union has appeared as the representative of employees. Reading therefore ss. 27A, 30 and 32 together, it is clear that on one else can appear in any proceeding under the Act except a representative of employees; but the authorities are empowered to permit anyone to appear 4

whether he be an employee or not, if they consider it expedient for the ends of justice (and we have no doubt that where representative of employees does not choose to appear the authorities will generally permit the employee who has made the application under s. 42(4) to appear), but this power is subject to the proviso, namely, that on one will be allowed to appear if the Representative Union has made an appearance. It will be seen that the proviso puts the Representative Union in a special position out of the six classes mentioned as representatives of employees in s. 30. Thus s. 32 makes it clear that where the Representative Union of the six classes s. 30, appears no one else can appear, including the persons who might have made an application under s. 42(4). If the other five classes which are mentioned in s. 30 as representatives of employees appear, the authorities have the power to allow the employee or any other person to appear along with them.

Then we come to s. 33, which starts with a non-obstante clause and deals with the appearance of an employee or a representative union through any person. Section 33 thus is a exception to s. 27A and authorises an employees who could not appear in any proceeding under the Act except through the representative of employees under s. 27A, to appear through any person in certain proceedings mentioned in s. 33, but this again is subject to provisos, with the first of which we 4

are not concerned here. The second proviso lays down that no employee shall be entitled to appear through any person in any proceeding under the Act in which the Representative Union has appeared as the representative of employees. This proviso again gives a special position to the Representative Union out of the six classes of representatives of employees provided in s. 30 and makes it clear that though an employee may appear in certain proceedings specified in s. 33 through any person in spite of s. 27A, he cannot do so where a Representative Union has appeared as the representative of employees. Here again the position is the same as in s. 32; if a representative of employees other than a Representative Union has appeared in the proceeding the employee can also appear through any person in the proceedings mentioned in s. 33; but he cannot did so where the representative of employees which has appeared even in proceedings under s. 33 is the Representative Union".

41. The Court also held that bona fides or

mala fides of the representative Union has

nothing to do with the complete ban imposed by

the Act on the appearance of any one else

except the representative of employees under

Section 30 of the Act.

4

42. It was argued that if such

interpretation is accepted, there would be

tyranny of the Representative Union. This

Court, however, negatived even that argument

and observed that the so-called tyranny or

motive of Representative Union cannot change

the legal position and it has no relevance if

the intention of the Legislature is clear and

unambiguous.

43. The Court, therefore, concluded;

"The result therefore of taking ss. 27A, 32 and 33 together is that s. 27A first places a complete ban on the appearance of an employee in proceedings under the Act once it has commenced except through the representative of employees. But there are two exceptions to this ban contained in ss. 32 and 33. Section 32 is concerned with all proceedings before the authorities and gives power to the authorities under the Act to permit an employee himself to appears even though a representative of employees may have appeared but his permission cannot be granted where the representative Union has appeared as a representative of employees. Section 33 which is the other exception allows an employee to appear through any person in certain proceedings only even though a representative of employees might have appeared; but 5

here again it is subject to this that no one else, not even the employee who might have made the application, will have the right to appear if a Representative Union has put in appearance as the representative of employees. It is quite clear therefore that the scheme of the Act is that where a Representative Union appears in any proceeding under the Act, no one else can be allowed to appear not even the employee at whose instance the proceedings might have begun under s. 42(4). But where the appearance is by any representative of employees other than a Representative Union authorities under s. 32 can permit the employee to appear himself in all proceedings before them and further the employee is entitled to appear by any person in certain proceedings specified in s. 33. But whenever the Representative Union has made an appearance, even the employee cannot appear in any proceeding under the act and the representation must be confined only to the representative Union. The complete ban therefore laid by s. 27A on representation otherwise than through a representative of employees remains complete where the representative of employees is the Representative Union that has appeared; but if the representative of employees that has appeared is other than the Representative Union then ss. 32 and 33 provide for exceptions with which we have already dealt. There can therefore be no escape from the conclusion that the Act plainly intends that where the Representative Union appears in any proceeding under the Act even though that proceeding 5

might have commenced by an employee under s. 42(4) of the Act, the Representative Union alone can represent the employee and the employee cannot appear or act in such proceeding".

44. Again, in Textile Labour Association,

Bhadra, Ahmedabad v. Ahmedabad Mill Owners

Association, Ahmedabad, (1970) 3 SCC 890, this

Court held that once Representative Union of

Textile Industry in the local area of Ahmedabad

entered into a compromise, such compromise

would bind all the employees and those

employees who are not members of the

Representative Union cannot contend that they

are against such compromise and are not bound

by it.

45. In Santuram Khudai v. Kimatrai

Printers & Processors Pvt. Ltd. & Ors., (1978)

1 SCC 162, a similar question arose. The Court

reiterated the law laid down in Girja Shankar

and held that once the Representative Union

appears on behalf of the employees in a

proceeding before a Labour Court under 1946 5

Act, individual workman has no locus standi.

According to the Court, combined reading of

Sections 27A, 30, 32, 33 and 80 of the Act make

it clear that consistent with the avowed policy

and prevention of exploitation of workmen and

augmentation of their bargaining power, the

Legislature has clothed the Representative

Union with plenary power to appear or act on

behalf of employees in any proceeding under the

Act. Keeping in view the said object, it has

deprived individual employees or workmen of the

right to appear or act in any proceeding under

the Act where the Representative Union enters

appearance or acts as representative of the

employees.

46. Following Girja Shankar, the Court

observed that mala fides or bona fides of the

Representative Union has no relevance in

construing the relevant provisions of the Act.

In case the employees find that the

Representative Union is acting in a manner

which is prejudicial to their interests, their 5

remedy lies in invoking the aid of the

Registrar under Chapter III of the Act

requesting him to cancel the registration of

the union.

47. Respondent No.8 in its affidavit

asserted that it is a Representative Union

under the Act of 1946, in Textile Industry in

Sholapur Municipal Corporation Area. It was

further stated that once a Representative Union

exists in any industry in a given local area,

it alone has the exclusive right to represent

the entire class of workmen in that industry in

the concerned local area. In the instant case

in the local area of Solapur District,

respondent No. 8 is admittedly the only Union

which has the status of Representative Union in

Textile Industry under the Act. In view of the

above fact, no other Union/Association of

employees or individual employees have right to

represent the workmen of that industry in that

area.

5

48. In the counter-affidavit, it was

stated by the Representative Union that there

were about 4500 employees in respondent No.1

Mill when it was closed down in February, 1995.

Within a period of about a decade, 400 workmen

had already died. None of them, however,

received any wages or other benefits because of

the pendency of several proceedings in

different courts. The Representative Union

considered their legitimate grievance and

thought it proper to get the matter settled if

reasonable amount could be paid to them,

keeping in view well-known saying "one in hand

is better than two on bush". They considered

the matter in its entirety, financial condition

of the first respondent-Company, claim of

secured and unsecured creditors, a number of

decrees and orders passed by various

Authorities under different laws and the

properties of the Company. In the larger

interest, the Union decided to accept the

amount of Rs.22.21 crores for workers towards 5

full and final settlement. By no stretch of

imagination, such action could be held

improper, illegal or mala fide. We are of the

view that the approach adopted and decision

taken by the Representative Union-respondent

No.8 suffers from no infirmity and cannot be

regarded as illegal or otherwise unreasonable.

EQUITABLE JURISDICTION UNDER ARTICLE 136

49. There is one more reason for not

interfering with the order passed by the High

Court and impugned in the present appeal. The

appellant has invoked Article 136 of the

Constitution. The said Article does not confer

a right of appeal on any party. It merely

confers discretionary power on this Court to

grant special leave to appeal in suitable and

appropriate cases. In several cases, this Court

has held that the provision confers right on a

litigant merely to prefer an application

seeking leave to appeal and the discretion is

vested in this Court to grant or refuse such 5

leave in its wisdom. In view of the language of

Article 136, this Court is not expected to act

as `regular Court of appeal' settling disputes

by converting into a `Court of Error'. It

interferes only when justice demands

intervention by the highest Court of the

country.

50. It is undoubtedly true that the power

of this Court is plenary, overriding and

extensive and there are no words qualifying,

restricting or limiting that power. The very

conferment of discretionary power defies any

attempt at exhaustive definition of that power.

The power, however, has to be exercised for

doing full and complete justice. But wider the

discretionary power, the more sparing its

exercise. Times out of number this Court has

stressed that though parties promiscuously

provoke this jurisdiction, the Court

parsimoniously invokes the power [vide

Sadhanathan v. Arunachalam, (1980) 3 SCC 141]. 5

51. While exercising power under Article

136 of the Constitution, this Court not only

acts as a Court of law but also as a Court of

equity and hence the power exercised by this

Court under Article 136 must subserve

ultimately the cause of justice. The Court must

decide all issues coming before it on the

considerations of justice, equity and good

conscience. Legal formulations cannot be

divorced from ground realities, fact-situations

before the Court and the effect of laws on the

human beings for whom they are meant.

Discretionary jurisdiction under Article 136,

therefore, has to be tampered with equity. This

Court would be failing in its duty if it does

not notice equitable considerations.

52. We are reminded of the following

pertinent and instructive observations of Lord

Watson in La Cite de Montreal v. Les

Eccelesiasticues, (1889) 14 AC 660.

"Cases vary so widely in their circumstances that the principle upon which an appeal ought to be allowed do 5

not admit of anything approaching to exhaustive definition. No rule can be laid down which would not necessarily be subject to future qualification, and an attempt to formulate any such rule might therefore prove misleading... A case may be of a substantial character, may involve matter of great public interest, and may raise an important question of law, yet the judgment from which leave to appeal is sought may appear to be plainly right, or at least to be unattended with sufficient doubt to justify."

53. As observed by this Court in Statesman

Ltd. v. Workmen, (1976) 2 SCC 223, the very

width of the power under Article 136 is a

warning against its `freewheeling exercise save

in grave situations'. Circumspection and

circumscription must, therefore, induce the

Court to interfere with the decision under

challenge only if the extraordinary flaws or

grave injustice or other recognized grounds are

made out.

54. We have elaborately dealt with the

facts of the present case. Respondent No.1--

Company was closed down in February, 1995. It

never started functioning thereafter. Financial 5

liability continued mounting up day by day.

There were several secured and unsecured

creditors and dues of workers. Proceedings

under SICA had been initiated, decrees and

orders were passed against the Company and the

property owned by the Company was not

sufficient to clear up all debts and

liabilities. Keeping in view the entire facts

and circumstances that initially, tripartite

agreement was entered into between respondent

No.1-Company, Representative Union and

intending purchaser on March 8, 2005, a joint

meeting was held between secured and unsecured

creditors, representatives of the Union, the

Company and the purchaser in April, 2005 and in

that meeting, One Time Settlement (OTS) had

been reached. Several actions were taken in

pursuance of the settlement. The amount was

deposited by the purchaser, dues of creditors

were paid, workers and laborers were informed

and they were also paid the amount. The

property was sold by respondent No.1 to 6

respondent No.7 on October 6, 2005, sale was

confirmed on December 6, 2005, possession of

the property was given to respondent No.7 on

December 14, 2005, sale certificate was issued

on January 20, 2006, respondent No.7 got the

property registered in its name on January 30,

2006 by paying stamp duty of Rs.2.25 crores,

secured creditors gave discharge to respondent

No.1-Company on March 30, 2007. By May 17,

2007, 4054 workers were paid and the said

figure, at the time of hearing of this appeal

reached to 4105. It was also stated by

respondent No.7-purchaser that plant and

machinery were removed and sold as scrap

materials.

55. If, at this stage, we set aside sale

in favour of respondent No.7, serious prejudice

will be caused not only to respondent No.1 and

respondent No.7--vendor and vendee,

respectively, but also to others like banks,

financial institutions, other creditors and

also to workers for whose benefit and welfare 6

the appellant is fighting. It is pertinent to

note that no secured or unsecured creditor has

come forward making grievance that though he

was entitled to more amount, he has not been

paid such amount. So far as workers are

concerned, we have already dealt with rights of

Representative-Union in detail and have held

that the Representative Union has preferential

right to appear in the proceedings under the

Act. Hence, taking any view of the matter, in

our opinion, this is not a fit case to exercise

discretionary and equitable jurisdiction under

Article 136 of the Constitution.

FINAL ORDER

56. For the forgoing reasons, in our

opinion, the appeal has no substance. It

deserves to be dismissed and is hereby

dismissed. On the facts and in the

circumstances of the case, however, there shall

be no order as to costs.

.................................J. 6

(C.K. THAKKER)

NEW DELHI, ..................................J. July 11 , 2008. (D.K. JAIN)