LexTEXTILE LABOUR ASSOCIATION AND ANR. versus THE OFFICIAL LIQUIDATOR AND ANR.
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) TEXTILE LABOUR ASSOCIATION AND ANR. v. THE OFFICIAL LIQUIDATOR AND ANR. APRIL 12, 2004 [S. RAJENDRA BABU, DR. AR. LAKSHMANAN AND G.P. MATHUR, JJ.] Companies Act, 1956: A B Ss. 529, 529-A and 530-Company under liquidation-Priority of C claims-Held, s.529-A will override all claims of other creditors even where a decree has been passed by a court-Purpose of s.529-A is to ensure that workers should not be deprived of their legitimate claims and assets of the Company would remain charged for payment for workers' dues- Such charge will be pari passu with the charge of secured creditors and have to be treated D accordingly-Constitution of India, 1950-Article 142. In the civil appeals disposed of by the Supreme Court, the official liquidator filed an application seeking permission to sell immovable properties of the Company under liquidation and to disburse the sale proceeds. In the said application n.either any of the Workers' Union nor E the workmen were impleaded as parties. The Court by its order dated 17.10.1997 directed that out of the assets of the company full dues of the ONGC would be paid first and payment to any other creditor would be considered thereafter. When the petitioner-Labour Unions made claim for outstanding dues of the workmen of the company, the Official Liquidator F communicated to them that in view of Supreme Court's order dated 17.10.1997, he was unable to make payment to anyone except the ONGC. Aggriev.ed, the Labour Unions filed the present petitions seeking review of the order dated 17.10.1997. Allowing the petitions, the Court HELD: 1.1. Section 529A of the Companies Act, 1956 will override all claims of other creditors even where a decree has been passed by a court. 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 G 1161 H 1162 SUPREME COURT REPORTS [2004] 3 S.C.R. A Article 142 of the Constitution, still the same will have to be read in the light of the decision of this Court in Supreme Court Bar Association's case*. [1166-B-El *Supreme Court Bar Association v. Union of India and Anr., [1998) 4 SCC 409 and UCO Bank v. Official Liquidator, High Court, Bombay and Anr., B [19941 5 sec 1, relied on. Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies and Ors., [1996) 4 SCC 165; Allahabad Bank v. Canara Bank and Anr., [2000) 4 SCC 406 and A.P. State Financial Corporation v. Official C Liquidator, [2000) 7 SCC 291, cited. 1.2. The effect of Sections 529 and 529A of the Companies Act 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 there is no secured creditor then the workmen of D the company become unsecured preferential creditors under Section 529A to the extent of the workmen's dues. The purpose of Section 529A is to ensure that the workmen should not be deprived of their legitimate claims in the event of liquidation of the company and the assets of the company would remain charged for the payment of the workers' dues. Under this Section dues of workers and debts due to the secured creditors are to be E treated pari passu and have to be treated as prior to all other dues. 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. Therefore, claims, if any, of ONGC will have to be worked out in accordance with Sections 529 and 529A as well. Order made F by this Court on 17.10.1997 will have to be read subject to provisions of Sections 529 and 529A of the Companies Act. [1166-C-F) CIVIL APPELLATE JURISDICTION : Review Petition Nos. 1193- 1203 of 200 I. IN G I.A. Nos. 168-178 of 1997 IN Civil Appeal Nos. 8530-40 of 1983. From the Judgment and Order dated 30 .7 .83 of the Gujarat High Court in S.C.A. Nos. 883179 with S.C.A. Nos. 913179, 1897/81, 2316, 2384, 2445, H 2470, 2977, 4194, 4520 and 2542 of 1982. --' ~ .. ' ~ ) TEXTILE LABOUR ASSN. v. OFFICIAL LIQUIDATOR [RAJENDRA BABU, J] J J 63 Raju Ramachandran, Additional Solicitor General, Mahendra Anand, A . A.K. Ganguli, R.F. Nariman, P. Krishnamurthy, Collin Gonsalvas, Rajan Narain, Ms. Puja Sharma, Siddharth Datta, Ms. Louleen Bhullar, K.R. Sasiprabhu, Shahid Rizvi, Manish Garg, Ms. G. Indira, M.K.S. Menon, Rakes
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