Allowed

Mtm Employees Co-Operative Thrift and C.S v. the O.L. M/S Mewar Textiles and Anr.

Rajasthan HC4 Apr 2019COAP/5/2018

Case brief

AI extract

What is this about?

The High Court directed the Official Liquidator to pay workmen interest on delayed dues from the winding-up date to the dividend declaration date at the current Punjab National Bank fixed deposit rate, rejecting the 4% cap applicable to unsecured creditors.

What did the court decide?

Direction to pay interest from 23.2.2010 to dividend date at Punjab National Bank fixed deposit rate.

Mtm Employees Co-Operative Thrift and C.S Vs the… — Company and Corporate | Rajasthan HC (2019)

¶1

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR

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S.B. Company Application No. 3/2018

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Mtm Employees Staff Consumer Cooperative Society Limited, Behind Railway Station, The Mewar Taxtile Mills Limited, Bhilwara Through Its President Shri Fateh Lal Heda, Aged About 58 Years.

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----Petitioner

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Versus

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The Official Liquidator, Mewar Taxtile Mills Limited, Bhilwara, Rajasthan, Jaipur, G-67, Residency Area, Civil Lines, Jaipur.

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The Mewar Taxtile Mills Limited, Bhilwara In Liquidation Through The.

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----Respondents

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S.B. Company Application No. 5/2018

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Mtm Employees Co-Operative Thrift And Credit Society Limited, Behind Railway Station, The Mewar Taxtile Mills Limited, Bhilwara Through Its Secretary Shri Fateh Lal Heda.

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----Petitioner

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Versus

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The Official Liquidator, Mewar Taxtile Mills Limited, Bhilwara, Rajasthan, Jaipur, G-67, Residency Area, Civil Lines, Jaipur.

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The Mewar Taxtile Mills Limited, Bhilwara In Liquidation Through The.

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----Respondents

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For Petitioner(s) : Mr.Manoj Bhandari. For Respondent(s) : Mr.Rakesh Arora a/w Mr.Imran Ahmed Siddiqui, OL.

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HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

Order

(2 of 4)

04/04/2019

These applications have been filed by the applicant society representing the workmen under Rules 9 & 163 of the Companies (Court) Rules, 1959 with the prayer that the claim of the workmen has been settled subsequent to the winding up and in accordance with law, the workmen need to be given interest on the delayed payment of their dues from the date of winding up till the date of actual payment.

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The Official Liquidator present in person submits that Rule 179 of the Companies (Court) Rules, 1959 is applicable and the interest at the rate of 4% per annum is payable.

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Learned counsel for the applicant has relied upon the judgment rendered by High Court of Madras in the case of A.

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Shanmugham vs. Official Liquidator, High Court, Madras

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and Ors. reported in (1992) 75 Comp. Case 181 (Madras), relevant portion whereof reads as follows :-

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“30. By Amendment Act No. 35 of 1985, Parliament had brought about very important and significant changes in the provisions of the Companies Act. By virtue of sections 529, 529A and 530, conferring substantial rights and benefits on the workmen of the closed undertaking, the workmen get rights pari passu with those of the secured creditors over the assets of the company in liquidation. Rule 179 of the Companies (Court) Rules, 1959, applies to unsecured creditors in the matter of payment of interest from the date of the winding up order till the date of dividend. The said rule cannot be applied to workers who, under the amended provisions of the Act, are treated on par with secured creditors. By virtue of the provisions of sections 529 and 529A, the workmen of the company have to be

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(3 of 4)

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treated on par with secured creditors. The status of secured creditors is conferred on the workmen by operation of law. 31. In State of Kerala v. M. Padmanabhan Nair, , the Supreme Court has held as follows while granting interest at 15 per cent. per annum (headnote) :

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"Pension and gratuity are no longer any bounty to be distributed by the Government to its employees on their retirement but are valuable right and property in their hands and any culpable delay in settlement and disbursement thereof must be visited with the penalty of payment of interest at the current market rate till actual payment. The liability to pay penal interest on these dues at the current market rate commences at the expiry of two months from the date of retirement."

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The above case is a glaring instance of culpable delay in the settlement of pension and gratuity claims due to the respondent/worker who retired in the year 1973. His pension and gratuity were ultimately paid to him on August 14, 1975, i.e., more that two years and three months after his retirement and hence, after serving a lawyer's notice, he filed a suit mainly to recover interest by way of liquidated damages for delayed payment. The State of Kerala put the blame on the respondent/workman for delayed payment on the ground that he had not produced the requisite last pay certificate from the treasury officer under rule 185 of the Treasury Code. But the High Court held that a duty was cast on the treasury office to grant to every retiring Government servant the last pay certificate which, in that case, had been delayed by the concerned officer for which neither any justification nor explanation had been given. The claim for interest was, therefore, rightly decreed in the respondent's favour.

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However, the claim for interest was allowed in favour of the respondent by the District Court and confirmed by the High Court at the rate of six per cent. per annum though interest at 12 per cent. had been claimed by the respondent in his suit. However, since the respondent acquiesced in his claim being decreed at 6 per cent. by not preferring any

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(4 of 4)

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cross-objections in the High Court, the Supreme Court thought that it would not be proper to enhance the rate to 12 per cent. per annum which they were otherwise inclined to grant.”

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After hearing learned counsel for the parties and the official liquidator, this Court is of the opinion that by virtue of amendment in the Companies Act, substantial rights and benefits were conferred on the workmen of the closed undertaking and the workmen are entitled to get the right pari passu with those of the secured creditors over the assets of the company in liquidation. This Court finds that Rule 179 which provides interest at the rate of 4% per annum is for the unsecured creditors whereas the precedent law cited by learned counsel for the applicant is absolutely in terms that it treats the workmen at par with secured creditors. Thus, the status of secured creditors is conferred on the workmen by operation of law.

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In view of the above, both these applications are disposed of with a direction to the Official Liquidator to pay interest to the workmen from the date of winding up i.e. 23.2.2010 till the date of declaration of dividend at the current rate of fixed deposit prevalent in Punjab National Bank. The said exercise shall be done by the Official Liquidator strictly in accordance with law.

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(DR. PUSHPENDRA SINGH BHATI)J.

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17-19-SPhophaliya/-

Mtm Employees Co-Operative Thrift and C.S v. the O.L. M/S Mewar Textiles and Anr.

Case brief

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Mtm Employees Co-Operative Thrift and C.S v. the O.L. M/S Mewar Textiles and Anr.

Case brief

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