Bombay High Court: A Division Bench comprising of A.S. Oka and M.S. Sonak, JJ. dismissed an appeal filed against the order of the Company Judge wherein he had directed the appellant- Bank to pay the dues of the workmen that shall be recovered by it as directed therein.

During the liquidation proceedings of one Zadona Electronics Ltd., the appellant and the Union representing the workmen of ZEL filed certain consent terms regarding the settlement of workmen dues. As per the terms, the Bank deposited over rs, 41 crores with the official liquidator to be distributed among over 800 workmen. Out of it, a sum of over Rs 50 lakhs was paid to 12 workmen whose claims were wrongly adjudicated as priority claims. On re-adjudication, the orders for recovery of such sum from the said 12 workmen was made and the recovery was in progress. However, as a result of such payment, there was a proportionate shortfall in the amounts to be disbursed to the remaining employers. The main issue before the Company Judge was whether the payment to remaining workmen should be deferred until the said recovery or whether the tank should make good the shortfall. The Judge decided for the latter. Aggrieved thereby, the Bank filed the instant appeal.

The High Court observed that as between the interests of the workmen and Bank, the Judge correctly exercised discretion in favour of the former. The court was satisfied that the order impugned was made in furtherance of Section 529-A of Companies Act, 1956. The object behind the provision was reiterated “since resources of companies constitute a major segment of the material resources of the community and common good demands that the ownership and control of the resources of every company are so distributed that in the unfortunate event of its liquidation, workers, whose labour and effort constitute an invisible but easily perceivable part of the capital of the company are not deprived of their legitimate right to participate in the product of their labour and effort. Therefore, the provision to accord a priority status to the workmen’s dues.” Furthermore, it was held that no prejudice would be caused to the Bank as it was entitled to receive the payment from the amount recovered from the said 12 workmen. In light of the above, the appeal was dismissed. [Kotak Mahindra Bank Ltd. v. Official Liquidator of Zadona Electronics Ltd.,2018 SCC OnLine Bom 4205, decided on 17-10-2018]

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