WORKERS OF ROHTAS INDUSTRIES LTD.versusROHTAS INDUSTRIES LTD.

          WORKERS OF ROHIAS INDUSTRIES LTD.
                                                                             A
                         v.
               ROHTAS INDUSTRIES LTD.

                         OCTOBER 24, 1989

          [RANGANATH MISRA, P.B. SAWANT AND                                  B
                 K. RAMASWAMY, JJ.]

    Sick Industrial Companies (Special Provisions) Act. 1985: ss.4 &
10-Rohtas Industries Ltd.-Rehabilitation of-Directions fdr.

      Four large industrial units owned by the respondent-company
were dosed down with effect from September 9, 1984 resulting in denial       c
of employment to about 10,000 employees. In the writ petition, the
workmen sought immediate payment of salary and wages for the period
since closure and compensation as per the amendment to the Industrial
Disputes Act in 1984 and payment of dues under the provident fund
account, gratuity etc. The High Court had in the meantime on May 22,         D
1986 appointed a provisional liquidator under the Companies Act.

       This Court on October 29, 1987 had directed the Central Govern·
ment to make a reference to the Board constituted in terms of s. 4 of the
Sick Industrial Companies Act, 1985, which had come into force, to
frame a scheme as contemplated under s.10 thereof for revival of the         E
company and submit it for consideration of the Court within four
months time. On September 7, 1988,~he Court took note of the fact that
the State of Bihar was inclined for nationalisation of the company and
directed a committee with the Industries Secretary to the Union of India
as its Chairman to be immediately constituted to work out th5 modalities
of nationalisation. On December 13, 1988 the Court considered the            F
report of the committee indicating that three units, excepting paper and
boards unit, were viable and could be revived, and adjourned the mat-
ter to give an opportunity' to the parties to explore the possibilities of
revival of the viable units. Till August 8, 1989 no substantial progress
had been made:Therealler the State of Bihar and the Union of India
filed their statements separately and the memorandum prepared by the         G
Attorney General was also made available to the Court.

      In this background the Court,

       HELD: 1. Living to about 10000 families has been denied for
over five years and apart frum national loss, the workmen have been          H

                                   615
    616           SUPREME COURT REPORTS              [1989] Supp. I S.C.R.

    put to serious jeopardy. There is a huge amount of wages outstanding to
A
    them. Several financial institutions have large dues to recover from the
    company. The Trnstees of the Debenture Trust Deeds have also sought
    to intervene to maintain their claim. Apart from these, the owners of
    the company have also pleaded that they are entitled to compensation in
    the event of the properties of the company being taken away by way
B   of nationalisation. A tut of assets are fast becoming useless and will soon
    become junk. If the company gets liquidated, the liabilities would turn
    out to be far in excess of the assets and notwithstanding first or
    second charge on the assets, the creditors may not appreciably bene-
    fit. It is, therefore, of paramount importance that the company in
    respect of viable units should be revived and allowed to come into
    production. (6200, A-Cl
c
           2.1 The State of Bihar is directed to appoint an authorised officer
    to be the Rehabilitation Administrator. [6208)

           2.2 The Provisional Liquidator appointed by the High Court
D    shall hand over to the Administrator all the assets of the company
    .which he had taken over under orders of tbat Court. The assets of
     the company not ·yet taken over shall vest forthwith in the Adminis-
     trator. [621A]

          2.3 The assets of the company encumbered with financial and
E   other institutions shall not be available to be proceeded against for a
    period of one year, and there shall be a moratorium for a period of one
    year in regard to proceedings taken and pending or to be taken against
    the company hereafter, and limitation shall remain suspended for the
    period. [6210-E]

F         2.4 The State Government of Bihar shall deposit within eight
    weeks an amount of Rs.15 crores with the Administrator against the
    cost of assets to be taken over. A similar sum of Rs.IS crores shall be
    advanced by the Union of India to the State from out of plan assistance.
    The sum paid by the State shall be utilised, in due course for pay-
    ment of arrears of wages of the workers and for disbursement of
G   secured loans of financial institutions and other parties for which
    security of the company's assets had been furnished. The Adminis-
    trator shall open an account with the lead nationalised bank for
    the State operating at Dalmianagar into which the two sums of money
    shall be credited. [621F-H] ··

H         2.5 The Administrator shall set up a Committee with a retired
                    WORKERS v. ROHTAS INDUSTRIES                        617

 High .Court Jµdge, a retired District Judge and an Accounts Officer to        A
 examine the claims of the owners of the company and other parties
 including financial institutions within six inonths and to report the mat·
 ter to the Court for directions. [622A]

        2.6 An inventory of all the articles shall be made within four
 weeks. Steps shall he taken to form a new company within four weeks.          B
 Appointment of technical consultants and other competent officers shall
 he undertaken within two months. The retrenched employees shall
 come back to work in phases. Steps shall be taken to explore the viabi·
 lily of the paper unit within three months after the company is recom-
 missioned in respect of the three units. Liberty is given to the parties to
 apply in the event of neces8ity. [622C·D & E]
                                                                               c
      2. 7 The case shall remain pending, to be called again on March 1,
 1990. [622H]

       ORIGiNAL JURISDICTION: Writ Petition No. 5222of1985.
                                                                               D
       (Under Article 32 of the Constitution of India)

       (With Writ Petition Nos. 443 and 754 of 1988)

        R.K. Garg, S.K. Verma, P. Anshu Mishra and R.S. Singh for
· the Petitioners in Writ Petition No. 5222 of 1985.                           E

      G.B. Pai and S.K. Sinha for the Petitioners in Writ Petition
 No.754 of 1988.

       K. Parasaran, Attorney General, G. Ramaswamy, Additional
 Solicitor General, Ms. A. Subhashini, Probir Mitra and K. Swamy for           F
 the Respondents.

       The following Order of the Court was delivered:

      Workmen of Rohtas Industries Limited situated at Dalmianagar
in District Rohtas within the State of Bihar sent a letter addressed to G
Hon'ble the Chief Justice of this Court on 8th of July, 1985, alleging
that the Company had four units, namely, paper and boards, cement,
asbestos and v\'getable ghee plant; the management closed down the
industries with effect from 9th cif September, 1984, and have denied
employment to about 10,000 employees. It was prayed that there
should be immediate restoration of electricity to the colony, payment H
    618           SUPREME COURT REPORTS               [1989] Supp. 1 S.C.R.

    of salary and wages for the period since closure should be directed and
A
    compensation as per the amendment to the Industrial Disputes Act in
    1984 and dues under the provident fund account, gratuity etc. should
    also be directed to be paid. This letter was registered as a writ petition
    and notice was issued. In the meantime by order dated 22.5.1986, the
    Patna High Court appointed a Provisional Liquidator under the Com-
B   panies Act. In the writ proceedings before this Court the employers,
    the Provisional Liquidator, the State of Bihar and the Union of India
    have, in due course, appeared.

          On 27.4.1987, the Court made an interim order in the matter of
    payment of arrear-wages by sale of assets. On 22. 7.1987, the Court
C   took note of the fact that the proposal for restructuring of the Com-
    pany was afoot in terms of its suggestion and stated that claims of the
    financial institutions would be considered later. On October 28, 1987,
    the Court stated:

                "This Court had issued notice to the Union of India and
D               learned Attorney General to ascertain if it is possible to
                revive the company which has suddenly gone sick. Learned
                Attorney General states that in the meantime Sick Indust-
                rial Companies (Special Provisions) Act, 1985 which
                received assent of the President on 8th January, 1986 has
                come into force and a Board in terms of section 4 thereof
E               has now been constitute,d. He suggests that a reference may
                be made to that Board and the Board may be called upon
                to frame the Scheme as contemplated under section 18 of
                the Act for revival of the company and instead of allowing
                the Scheme to be dealt with further under the Act, the
                Board may be called upon to submit its Report along with
F               the Scheme for consideration of this Court. He also sub-
                mits that in the special facts of the case there is no necessity
                to subject the Scheme to a statutory appeal. Counsel for
                the petitioners agrees that an effort may be made as per the
                suggestion of the learned Attorney General."

G   The Central Government made a reference to the Board within one
    week as directed by the Court and the Board was given four months'
    time to frame the Scheme. On 7.9.1988, this Court took note of the
    fact that the State of Bihar was inclined for nationalisation of the
    Company. The Union of India filed an affidavit that if any proposal k
    mooted for nationalisation, it would be supported. This Court stated
H   in thisorderof7.9.198~:
                  WORKERS v. ROHTAS INDUSTRIES                    619

           "On examining the matter in this background we are of the A
           view that it is in the interest of everyone that the industrial
           establishment should be revived and sooner it is the better.
           In these circumstances, we direct that a Committee with
           the Industries Secretary of the Union of India as its
           Chairman be immediately constituted to work out the mod-
           alities of nationalisation. The Committee should consist of B
           the Secretary, Industries, Government of Bihar, senior
           representatives of the creditor financial institutions,
           Finance Secretary of Government of India or his represen-
           tative and representative of Reserve Bank of India. The
           Committee should examine ··the matter and submit its
           report within six weeks ........... "
                                                                        c
On 9.8.1989, the Court took note of the report by saying:

           "The report submitted to this Court indicates that three
           units excepting paper unit are viable and can be revived.
           On the 13th of December, 1988, this Court considered the D
           report and adjourned the matter to give an opportunity to
           the parties to explore the modalities of revival of the three
           viable units. No substantial progress has been made as we
           find. By the adjourned date the modalities should be dis-
           cussed and finalised and reported to the Court so that an
           order can be made to revive the three units.                  E

                 The report indicated that in regard to paper unit, the
           Committee was not of the opinion that it was viable.
           Learned Atforney General and Mr. Pai had been requested
           by the Court to explore the possibilities of revival of the
           paper unit. Ms. Subhashini on behalf of the learned F
           Attorney General states that given two weeks' time further
           discussions shall be held and a complete decision may be
           reached as regards the paper unit .......... "

A joint memorandum was filed by the Union of India and the State of
Bihar on 12.9.1989 which the Court rejected on account of the fact that G
there was no clear and definite indication in the memorandum as to
revival. Thereafter, the State of Bihar and the Union of India have
filed their statements separately and a copy of the memorandum pre-
pared by the learned Attorney General and circulated has also been
filed before· us. We have also heard learned counsel for the parties in
the matter.                                                             H
    620           SUPREME COURT REPORTS             [1989] Supp. 1 S.C.R.

A        It is not disputed that there is a huge amount of wages outstanding
    to the workmen. Several financial institutions have large duei; to
    recover from the Company. The Trustees of the Debenture Trust
    Deeds have also sought to intervene in this Court to maintain their
    claim. Apart from these, the owners of the Company have also
    pleaded that they are entitled to compensation in the event of the ·
B
    properties of the Company being taken away by way of nationalisation.

           As already noted, the Company-has been closed down for more
    than five years now. A lot of assets are fast becoming useless and will
    soon become junk. Several attempts were made to dispose of some of
    the stocks held by the Official Liquidator but for one reason or the
c   other it has not been possible to complete the sale and though this
    Court had directed that the sale proceeds would be utilised for pay-
    ment of arrears-wages, that has"not been feasible. Claims have been
    laid against the Company and are perhaps awaiting adjudication. If the
    Company is not revived and gets liquidated, the liabilities would turn
    out to be far in excess of the assets and notwithstanding first or second
D   charge on the assets, the creditors may not appreciably benefit. This
    Court cannot lose sight of the fact that living to about 10,000 families
    had been denied for over five years and apart from national loss, the
    workmen have been put to serious jeopardy. In these circumstances,
    we are satisfied that it is of paramount importance that the Company
    in respect of the viable units should be revived and allowed to come
E   into production. Unless there be      a   moratorium in regard to the
    liabilities of the Company for a reasonable time, the attempt to revive
    the Company in respect of the three units is bound to be frustrated
    upon the intervention of the creditors, whereas once the company is
    revived and big commercial activities are carried on, profit is bound to
    be earned and a conscientious and prudent administration would cer-
F   tainly, in due course, provide adequate funds for satisfaction of the
    debts. At present the question is one of priorities. It has to be pru·
    dently decided as to which ones should be allowed to go ahead and
    which should be made to wait.

          In this background and on the basis of the memoranda filed by
G   the State of Bihar and the Union of India and the note prepared by
    learned Attorney General and made available to us by Mr. Pai for the
    other side with the Attorney General's consent, we give the following
    directions:

          1. The State of Bihar shall appoint an authorised officer from
H         the Senior IAS cadre with appropriate commercial background
             WORKERS v. ROHTAS INDUSTRIES                     621

to be the Rehabilitation Administrator.                             A

2. The Provisional Liquidator appointed by the High Court of
Patna shall hand over to the Administrator all the assets of the
                                                                        ..
Company which he has taken over under orders of the Court.
Such assets of the Company which have not yet been taken over B
by the Provisional Liquidator shall upon the appropriate officer
being designated vest in him forthwith and he is. clothed with the
necessary power under our present orders to take such steps as
are necessary to take over possession of such assets of the Com-
pany. In the event of a dispute arising out of the decision of the
Administrator that the asset is of the company and is to be taken
over by the Administrator, an appeal shall be maintainable C
before a Division Bench of the Patna. H_igh Court .an<! the Judges
to constitute such Bench shall be nominated by the learned Chief
Justice. For convenience the same Judges shall continue on the
nominated Bench for a reasonable period.
                                                                   D
3. The assets of the Company encumbered with financial and
other institutions shall not be ]lvailable to be proceeded against
for a period of one year from today and there shall be a
moratorium for a period of one year in regard to proceedings
taken and pending or to be taken against the Company hereafter
and limitation shall remain suspended for the period under our E
orders of today. It would be open to the Court on being moved to
extend the moratorium.

4. The costs of the entire assets to be taken over by the State
Government of Bihar as per the book value and the dues against
the company are estimated to be within the limit of Rs.15 crores. F
The State Government of Bihar has undertaken before us to
deposit the amount of Rs.15 crores with the Administrator
wiihin eight weeks from today. A similar amount of Rs.15 crores
shall be advanced by the Union of lnida to the State of Bihar
from out of plan assistance for the State. T.he sum of Rs.15 crores
paid by the State Government shall be utilised, in due course, for G
payment of arrears of wages to the workers and for disbursement
of secured loans of financial institutions and other parties for
which security of the Company's assets had been furnished. The
Administrator shall open an account with the lead nationalised
Bank for the State of Bihar operating at Dalmianagar into which
the two sums of money being Rs.15 crores each shall be credited.
                                                                    H
    622             SUPREME COURT REPORTS              [1989] Supp. 1 S.C.R.

          5. The Administrator shall set up one Committee with a retired
A
          High Court Judge, a retired District Judge and an Accounts Of-
          ficer with at least five years' experience as Financial Advisor to
          the State Government to examine the claims of the owners of the
          Company and other parties including financial institutions. This
          should be done within six months from now. Once the list of
B         creditors is settled with all reasonable particulars, the matter
          should be reported to this Court for directions and it shall be
          open to this Court to finally indicate the figure at which each
          such claim shall be settled.
         An inventory of all the articles shall be made within four weeks
    from now. Steps shall be taken to form a new company within four
c   weeks from now.
           Appointment of technical consultants and other competent of-
    ficers shall be undertaken within two months hence.
         The asbestos, cement and vanaspati plants shall be commis-
    sioned after effecting such repairs as may be necessary.
D
          The retrenched employees shall come back to work in phases.
    The first phase shall admit a thousand workers, the second phase shall
    admit an equal number and in the third phase, such number of further
    workers as may be necessary to run the industries in a viable way shall
    be finalised. All expeditious steps as may be possible shall be taken to
E   provide employment.
          Steps shall be taken to explore the viability of the paper unit
    within three months after the Company is re-commissioned in respect
    of the three units .. Liberty is given to the parties to apply in the event
    of necessity but it is made clear that no extension in regard to payment
    of the fifteen crores of rupees by the State Government and the Union
F
    Government shall be granted. Every attempt should be made by all
    concerned to give effect to the order keeping its true purport and spirit
    in view. We do not intend to leave doubts in any one's mind that the
    purpose of our order is to revive the Company and make it work
    viably. Everyone charged with the responsibility of implementing the
    order of the Court shall, therefore, be expected to work in such a way
G
    as would fulfil that purpose.

          We direct that the case shall remain pending in this Court and
    shall not be taken to have been disposed of by this order. Call the case
    on 1st of March, 1990.

    P.S.S.