Calcutta High Court
Mining And Allied Machinery ... vs Asansol Durgapur Development ... on 16 August, 2022
OD 1-4
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
APO/76/2019
With
BIFR/510/1992
IN THE MATTER OF:
MINING AND ALLIED MACHINERY CORPORATION LTD.
AND
ASANSOL DURGAPUR DEVELOPMENT AUTHORITY
VS.
STATE BANK OF INDIA & ANR.
AND
APO/77/2019
With
BIFR/510/1992
IN THE MATTER OF:
MINING AND ALLIED MACHINERY CORPORATION LTD.
AND
ASANSOL DURGAPUR DEVELOPMENT AUTHORITY
VS.
STATE BANK OF INDIA & ANR.
AND
APO/78/2019
With
BIFR/510/1992
IN THE MATTER OF:
MINING AND ALLIED MACHINERY CORPORATION LTD.
AND
ASANSOL DURGAPUR DEVELOPMENT AUTHORITY
VS.
THE OFFICIAL LIQUIDATOR, HIGH COURT,
2
CALCUTTA
AND
APO/79/2019
With
BIFR/510/1992
IN THE MATTER OF:
MINING AND ALLIED MACHINERY CORPORATION LTD.
AND
ASANSOL DURGAPUR DEVELOPMENT AUTHORITY
VS.
MINING AND ALLIED MACHINERY CORPORATION LTD.(NOW IN LIQN.) & ORS.
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
AND
The Hon'ble JUSTICE SIDDHARTHA ROY CHOWDHURY
Date : 16th August, 2022
Appearance:
Mr. Malay Kr. Ghosh, Sr. Adv.
Mr. Sayantan Bose, Adv.
Mr. Rajarshi Dutta, Adv.
Ms. Madhurima Das, Adv.
...for the appellant
Mr. Joy Saha, Sr. Adv.
Mr. Shamit Sanyal, Adv.
Mr. Sabyasachi Roy, Adv.
...for the State Bank of India
Mr. Jayanta Banerjee, Adv.
Mr. Anida Bhattacharjee, Adv.
...for the Official Liquidator
Mr. Soumya Majumdar, Adv.
Mr. Santanu Chatterjee, Adv.
...for the respondent no.2 in APO 79 of 2019
Mr. Susanta Pal, Adv.
...for MAMC Township Abasik Welfare Association &
MAMC Praktan Sramik Kalyan Samiti
The Court:- These appeals are at the instance of the Asansol Durgapur
Development Authority (in short 'ADDA'). Four applications have been filed
between 2011 and 2013 by the ADDA and the State Bank of India. The ADDA
in both the applications essentially prayed for transfer of the security deposit
with accrued amount to ADDA on the basis of a settlement arrived at by ADDA
with MAMC Retired (VRS & VSS) and Superannuating Employees' Association
of Society, MAMC Township Abasik Welfare Association and MAMC Praktan
Sramik Kalyan Samiti.
The learned Single Judge disposed of all the four applications with the
following observation :
"Accordingly, CA 488 of 2011, CA 514 of 2013, CA 515 of 2013 and CA
33 of 2013 are disposed of by holding that the fixed deposit receipts or
cash or KVP certificates that the ex-workers of the company (in
liquidation) deposited prior to the company going into liquidation with
the company are to be retained and immediately taken control of by the
Official Liquidator without ADDA or the ex-workers having any right in
respect thereof or any right to deal with the same. The Official
Liquidator will use such funds for disbursal to the creditors of the
company (in liquidation), including the ex-workers who made the
deposits, in their turn and in accordance with law. It is elementary
that till the dues of the secured creditors are discharged to the extent of
the securities enjoyed by such creditors, the dues of the unsecured
creditors cannot be taken up. Even if the deposits are not part of the
securities of the secured creditors, the general pool of the unsecured
creditors of the company (in liquidation) will be entitled thereto without
the depositors having any preferential right therein."
The ADDA has preferred three separate appeals being aggrieved by the
said judgment and order passed by the learned Single Judge. The appeals
involve very short question, namely, whether certain Fixed Deposit Receipts,
KVP Certificates and cash deposited by the erstwhile employees of the
company (in liquidation), with the company prior to its liquidation are liable to
be refunded to such erstwhile employees or to their order or they are to be
dealt with by the Official Liquidator in accordance with law.
Mr. Malay Kumar Ghosh, learned Senior Counsel representing the ADDA
submits that several orders were passed during the pendency of the winding
up proceedings which show that the amount deposited towards security by the
ex-employees, with whom ADDA has now entered into a settlement for their
occupation after the township was transferred to ADDA on or from 1 st July,
2003 are required to be refunded to ADDA in terms of the settlement arrived at
between ADDA and such ex-employees. Mr. Ghosh has referred to various
orders in this regard and tried to impress upon this Court that having regard
to the nature of the deposits made by such ex-employees the Official
Liquidator was under obligation to refund the said security deposits after the
towndship is made over to the ADDA.
Mr. Jayanta Banerjee, representing the Official Liquidator, submits that
the Official Liquidator upon adjudication has determined that a sum of
Rs.66,25,96,494/- is due and payable to 3738 regular/permanent workmen of
the company (in liquidation). The claim of 286 contract labourers for a sum of
Rs.16,61,82,079/- was not admitted and there is no formal claim on behalf of
the MAMC Praktan Sramik Kalyan Samiti apart from a letter dated 27 th May,
2019. They have not filed their proof of debts and accordingly, their claim
could not be adjudicated. Mr. Banerjee further submits that proof of debts
would not show that any claim was made on account of refund of security
deposit.
Mr. Joy Saha, learned senior counsel appearing on behalf of the State
Bank of India, one of the secured creditors, submits that initially, ADDA
wanted to snatch an order from the Court by giving a false impression that all
the necessary parties are equipped with the terms of settlement, which,
however, on the intervention of SBI was recalled. It is submitted that the
circular dated 3rd June, 1999 issued by the office of the General Manager
(Personnel), MAMC Limited clearly states that ex-employees may occupy the
quarters as a licensee on a temporary basis for six months from the date of
separation and it has laid down various conditions for their continued
occupation of the said quarters, which, inter alia, required them to submit
security deposit and the monthly licence fees as applicable as per Annexure-I
to the said circular. It is submitted that all such ex-employees who have now
joined with ADDA in the settlement process continued to remain in occupation
beyond the period of six months and it needs to be adjudicated whether they
have paid their electricity and all other charges beyond the period of six
months and whether there had been any breach in terms of the said license
agreement thereby forfeiting their rights to claim any amount.
Mr. Soumya Majumdar, learned counsel appearing on behalf of the
MAMC Retired (VRS & VSS) and Superannuating Employees' Association of
Society, submits that under the several arrangements agreed between the
association and the company (in liquidation), the employees were to receive ex-
gratia/gratuity out of the security deposit and the claim of the workmen
includes such claim towards ex-gratia and gratuity. However, he has fairly
submitted that some of the ex-employees have deposited cash towards security
for their continued occupation of the quarters.
In the aforesaid backdrop, the merits of the appeals have to be assessed.
The company was referred to BIFR under the provision of Sick Industrial
Companies (Special Provisions) Act, 1985. All efforts to revive the company had
failed before the BIFR. Accordingly, BIFR made a recommendation for winding
up of the company. The Appellate Forum also accepted the order of the BIFR.
Thereafter, a recommendation was made under Section 20(1) of the Act of
1985 for the company to be wound up. The company was wound up by this
Court by an order dated 16th May, 2002. In an appeal arising out of the order
of winding-up or one of the subsequent orders, a scheme was directed to be
framed by the Appellate Court so that the township which was occupied by the
erstwhile employees of the company (in liquidation) did not have to be vacated.
The township had been built on land made available to the company by the
State of West Bengal. In short, under the scheme, the houses and dwelling
units under the occupation of the ex-employees of the company (in liquidation)
continued to be retained by them on certain terms and conditions, including
as to payment, which may not be relevant for the present purpose.
We have already referred to the initial circular dated 3 rd June, 1999
which carried the number of 11/99. It pertains to erstwhile employees who
were at the relevant time still occupying the company quarters in spite of their
retirement. This circular contemplates certain situation for which they were
provided with the benefits to occupy their quarters on a temporary basis as
licensees for a period of six months. It was an option given to the ex-employees
that on fulfillment of certain obligations and conditions stipulated in the
license agreement, they would be allowed to retain the quarters. Their
occupation as licensee is dependent upon certain conditions to be fulfilled by
such employees.
A proforma licence agreement was appended to the circular and such
licence agreement contemplated licence fees and security deposits to be paid
by the erstwhile employees who continued to enjoy the company's quarters.
Clause 2 of the licence agreement appended to circular no.11/99 dated
June 3, 1999 provided as follows:
"It is agreed that the Licensee shall deposit and keep in deposit with
the Licensor a sum of Rs. ............. only as Security for the due and
proper performance of the terms of this leave and licence, which amount
shall be refunded to the Licensee mentioned on the termination or
revocation of this licence after deducting therefrom such amount as may
be due to the Licensor by way of arrears of charges/compensation for
the use and occupation of the said premises and/or for the loss and/or
damage to the depositors, if required, articles and things belonging to
the Licensor."
In addition, clause(3) of the proforma licence agreement referred to a
licence fee that was payable. The figures would have, probably, varied from
person to person and in the proforma agreement it was kept blank. An
annexure to the proforma licence agreement or to the circular itself of June 3,
1999 indicated the quantum of security deposits required to be furnished by
the erstwhile employees in occupation of the various categories of
accommodation and the corresponding licence fees. The quantum of deposit
ranged from Rs.61,300/- to Rs.8,85,400/- and the licence fees ranged from
Rs.818 to Rs.5000/- per month. Water charges were also payable at variable
rates depending on the type of accommodation.
A corrigendum to the circular of June 3, 1999 was issued on June 17,
1999. Clause (ii) of such corrigendum is of some relevance:
"(ii) Ex employees residing in residential accommodation provided
by the Corporation in Sagarbhanga/Bidhannagar who are willing
to get the tenancy residential accommodation under their
occupancy transferred in their names may apply to the Housing
Board and forward a copy to the office of the Chief Town
Administrator, MAMC Ltd., Durgapur-10. Till the time transfer of
tenancy in personal name is concluded, an amount of Rs.15,000/-
shall be withheld towards security deposit from the ex-gratia
amount for those ex-employees released under VSS. For other
category employees released under superannuation/VRS shall be
required to deposit the ................... The security deposit as
indicated above shall be refunded after transfer of tenancy of
residential accommodation and electric connection in the personal
name of the occupant is concluded subject to adjustment of
outstanding dues towards rent, electricity & water charges."
It is not in dispute that in terms of the said circular and the corrigendum
relating thereto, the security deposits that were required to be furnished were,
indeed, furnished whether by way of cash or by way of deposit of fixed deposit
receipts or KVP certificates or the like. The Official Liquidator reports that
fixed deposits of value in excess of Rs.65 Crore are available, whether with the
Official Liquidator or as made over to ADDA pursuant to the previous order,
but which money has not yet been appropriated by ADDA. In addition, KVPs
of value of about Rs.1.85 Crore and cash of about Rs.26 lakh remain with the
Official Liquidator or ADDA.
The money or the fixed deposits or certificates and the like were almost
lost to the company (in liquidation) pursuant to the unilateral arrangement
between the ex workers of the company (in liquidation) and ADDA and the
application filed in Court which was allowed without reference to the secured
creditors of the company (in liquidation). At the instance of the secured
creditors of the company (in liquidation) the order has been kept in abeyance
in the sense that ADDA has not been permitted to appropriate the money or
funds that it may have received or the deposits that may have been made over
to it.
The secured creditors, primarily nationalised banks, say that against their
dues running into several hundreds of crores of rupees, a total amount of
about Rs.63 crore has been released on a pro rata basis upon the assets of the
company (in liquidation) fetching a price of about Rs.100 crore. The balance
amount has been retained by the Official Liquidator to cover the Official
Liquidator's expenses and to await further orders of the Company Court as to
how the same may be disbursed. The secured creditors, speaking thorough
the State Bank of India, insist that the deposits were required to be received by
the company and the position after the company has gone into liquidation is
that the depositors or the ex workers of the company (in liquidation) would be
creditors of the company (in liquidation) and no more. It is the further
submission on behalf of the State Bank that in respect of such dues of the
workers of the company (in liquidation) Section 529A of the Companies Act,
1956 cannot be pressed into service and, as such, the ex workers of the
company (in liquidation) who have made such deposits have to be regarded as
ordinary creditors who will stand in the queue to be eligible to receive their
dues after the entire dues of the secured creditors have been discharged.
The ex-workers or the associations espousing their cause and ADDA,
which has no conflict of interest with the ex-workers, submit that the ex-
workers were only required to keep a certain amount of money by way of
deposit which could never been appropriated by the company (in liquidation)
till such time that the conditions for such appropriation arose. It is the further
submission, particularly of ADDA, that in the majority of cases fixed deposit
receipts were merely made over by the ex-workers of the company to the
company. As such, ADDA maintains that the fixed deposit receipts were
retained by the company without the property in the fixed deposits ever
passing from the depositors to the company.
What is evident from the circular of June 3, 1999, including its
corrigendum of June 17, 1999, is that the ex-workers of the company who
retained possession of the company's quarters were required to put in liquid
cash by way of deposit. The circular or its corrigendum did not contemplate
the deposit to be made in any other form. It is true that that the deposits
could be touched by the company only upon certain conditions in the nature of
default happening. However, the right of the ex-workmen to receive back the
deposits, for the moment not considering that the deposits were made by
furnishing bank deposit receipts, would amount to the refund of the money by
the company.
Once the company went into liquidation, the status of the ex-workers who
made the deposits would be no higher than the status of an unsecured creditor
of the company. It is quite irrelevant in the circumstances as to the manner in
which the deposits were made, once it is appreciated that the deposits were
made pursuant to the circular of June 3, 1999 that contemplated liquid money
to be kept in deposit. Further, water charges and like dues could be deducted
from the deposits by the company and only the balance was liable to be
refunded. If any refund was not made despite a demand, the relevant ex-
worker would be entitled to lodge a money claim.
Mr. Saha, learned senior counsel representing the secured creditor, has
strenuously argued and insisted that the deposits were required to be received
by the company and the position of the said deposit after the company has
gone into liquidation is that the depositors or the ex-workers of the company
(in liquidation) would be placed in the category of creditors of the company (in
liquidation) and cannot be elevated to the position of secured creditors. It is
further argued that dues of the secured creditors, namely financial institution
shall not rank pari passu with the dues of the workmen under Section 529A of
the Companies Act, 1956. The subsequent deposits made by the ex-workmen
after their employment have ceased for their continued occupation in the
quarters on a temporary basis cannot be treated at per with the claim of the
secured creditors as envisaged under Section 529A of the Companies Act,
1956.
We are in agreement with the argument advanced on behalf of the
secured creditors. The circular dated 3 rd June, 1999 with the corrigendum of
17th June, 1999 made it abundantly clear that such deposits were made for
fulfillment of certain conditions stipulated in the license agreement and the
nature of such deposits cannot be stretched beyond as contemplated under
the said license agreement. It is true that the deposit could be utilized by the
company only upon certain conditions in the nature of default happening,
however, the right of the ex-workmen to receive such amount would be in the
nature of refund of the money by the company.
There is nothing on record to show that erstwhile employees had paid all
the amounts that were required to be paid under the license agreement for
their continued occupation or there were any arrangement after the expiry of
six months time under the license agreement. Moreover, it could not be made
clear by the erstwhile employees whether the claim lodged by the workmen
were adjudicated upon by the Official Liquidator towards ex-gratia or gratuity.
They are unable to say whether the proof of debts/claim mentioned any
outstanding ex-gratia or gratuity.
Once the company while in liquidation, the status of the Ex-workers who
made the deposits cannot be elevated to the status of secured creditors, their
status would be no higher than the status of the unsecured creditors of the
company. We are in agreement with the learned trial Judge that it is quite
irrelevant in the circumstances as to the manner in which the deposits were
made, once it is appreciated that the deposits were made pursuant to the
circular of 3rd June, 1999 that contemplated liquid money to be kept in
deposit. Further, water charges and like dues could be deducted from the
deposits by the company and only the balance was liable to be refunded. It is
also quite clear that once a company has gone into liquidation, all the deposits
were, by law, come under the control of the Official Liquidator for the Official
Liquidator to deal with the same in accordance with the provisions of the Act,
1956. The deposits, regardless of its nature by reason of the provisions of the
act, should be treated to be a money that had come into the hands of the
Official Liquidator upon the company going into liquidation and the
disbursement thereof cannot be made otherwise than as recognized in the
statute.
On such consideration, we do not find any reason to interfere with the
order of the learned Single Judge. Accordingly, all the appeals i.e.,
APO/76/2019, APO/77/2019, APO/78/2019 and APO/79/2019 stand
dismissed.
There shall, however, be no order as to costs.
(SOUMEN SEN, J.)
(SIDDHARTHA ROY CHOWDHURY , J.)
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