K. Dattam Bhat vs The Official Liquidator

Anand Byrareddy, J.—There is a delay of 890 days in filing the application. For the reasons stated, the application seeking condonation of delay is allowed.

The applicant having made a claim for Rs. 10,69,282/- towards Gratuity, Leave remuneration and Leave Travel Concession as an ex-employee of the company in liquidation, the Official Liquidator on adjudicating the said claim, had partially allowed the claim while rejecting the claim in respect of balance amount. Therefore, the application.

The learned Counsel for the applicant would contend that the claims of the applicant be adjudicated and Form 69 be set aside.

It is contended that the Company in liquidation had maintained a separate Gratuity Fund Account Trust for settlement of Gratuity dues to its employees and hence the employees are advised to approach the Mysore Kirloskar Limited Employees Gratuity Fund and the Mysore Kirloskar Officers Group Gratuity Fund and the Official Liquidator is bound to adjudicate the claim u/s 530 of the Act in respect of the Gratuity is concerned.

The learned Counsel for the Official Liquidator would justify the action of the Official Liquidator. In the light of the above contentions, it is to be noticed that this Court in C.A. No. 160 of 2012 and connected applications dated 29-5-2012 in Ambannasa Katwe and Others v. The Official Liquidator, has held as under:

"8. In the light of the contentions, a perusal of the relevant provision would indicate that Section 529-A of the Act provides for overriding preferential payments. Subject to the same. Section 530 provides for preferential payments in priority to all other debts. The payments which receive priority have been enumerated in clauses (a) to (g) of sub-section (1) of Section 530. Sub-section (2) provides that the sum to which priority is to be given under clause (b) of sub-section (1) shall not, in the case of any one claimant exceed such sum as may be notified by the Central Government in the Official Gazette. In exercise of that power u/s 530(2), a notification is issued as hereunder:

"Notification No. G.S.R. 80(E), dated 17th February, 1997 - In exercise of the power conferred by sub-section (2) of Section 530 of the Companies Act, 1956 (1 of 1956), the Central Government hereby notifies that the sum to which priority shall be given under clause (b) of sub-section (1) of Section 530 of the said Act with effect from 1st day of March, 1997, shall not in case of any one claimant exceed the sum of Rs. 20,000 (Twenty thousand only).

The question therefore is as to whether the Official Liquidator is justified in applying the notification to the claim made under different components which fall under clauses (b), (c) and (f) in the instant case?

The issue at the outset would therefore be with regard to the manner of consideration of the unpaid salary/wages to its employees as preferential and the limit applicable. In that regard, the adjudication of the said amount would be as contemplated u/s 530(1)(b) of the Companies Act. To the said extent, the notification dated 17-2-1997 relied on by the Official Liquidator would certainly be applicable. In that view, a perusal of the provision contained in sub-section (2) to Section 530, as rightly pointed out by the learned Counsel for the applicant would indicate that the said sub-section has been made applicable only to the amount adjudicated u/s 530(1)(b) towards wages or salary and not to the categories claimed under clauses (c) to (g) contained in Section 530(1) of the Act. If that be the position, insofar as the determination of the accrued leave remuneration and with regard to the amount payable towards Gratuity and other similar amounts, the said notification cannot be made applicable. In other words, it would be clear that with regard to the amount of Leave Remuneration and the Gratuity to be adjudicated by the Official Liquidator as admitted and payable to an employee, the same cannot be limited to any extent. The entire adjudicated amount under the said category, would have to be admitted for preferential payment along with the salary or wages admitted and limited to the extent of Rs. 20,000/- as provided under the notification. Therefore, the manner in which the Official Liquidator has treated the preferential payment in the instant case vide the impugned order dated 3-10-2011 in C.A. No. 160 of 2012 and similar orders in the connected cases are not sustainable. Hence, the respective claims of the applicants herein calls for readjudication at the hands of the Official Liquidator.

The entitlement to the leave remuneration and the Gratuity claimed in the instant case will also have to be determined by the Official Liquidator by adopting a uniform procedure when the matter is being readjudicated. Insofar as the leave remuneration, there can be no doubt that the said amount is an amount which would be payable by the company if it had fallen due and had not been paid to an employee as has been held in the Textile Labour Association, Bhadra, Ahmedabad Vs. Official Liquidator, Ahmedabad and Others, . Therefore, such amount in any event, would have to be treated as the amount payable, if there is material produced by the employee justifying such claim and verified by the Official Liquidator from the records of the company. The entire amount determined thereto as due and payable will have to be treated for preferential payment in the manner as stated above.

With regard to the claim for gratuity amount, as noticed in the scheme of the provision made by the Company in liquidation while it was an on-going concern, the gratuity fund had been created in the manner as mentioned above by forming independent Trust. The amount payable to the employees towards Gratuity was to be deposited by the company in the fund created by the Trust. In such event, the disbursement of the amount deposited by the company was to be made by the Trust. Therefore, the first liability for payment of Gratuity would be that of the Gratuity Fund Trust to the extent of the amount that the company had already deposited with the Trust without reference to the liquidation. Hence, the employees concerned more particularly the applicants herein would have to first approach the respective Gratuity Fund Trust from whom they were entitled to receive the Gratuity amount and seek for disbursement of the gratuity due to them for the services rendered to the respondent-company and as deposited by the company. From the amount available with the Trust, the disbursement would be made to the employee. If the Gratuity Trust informs the employee that the Gratuity payable to such employee has not been deposited by the company for the entire length of service, the amount not deposited in respect of such period of service rendered by the employee would still remain to be the liability of the respondent-company and the same would form a part of the workmen''s dues which would still remain as a preferential payment payable to the employee.

In view of the above, in support of the affidavit of proof which has already been filed by the employee wherein the amount claimed towards Gratuity is also indicated, the employee concerned would have to furnish such material from the Gratuity Trust to indicate that only a portion of the amount was made available to the Trust and the balance is payable by the company. Such material obtained shall be furnished to the Official Liquidator in support of the affidavit of proof which requires readjudication at this point. Based on the additional material that would be filed, the claim for gratuity also would be readjudicated by the Official Liquidator for the purpose of treating it as preferential payment."

In that view of the matter, the application stands disposed of in terms of CA No. 160 of 2012 and connected matters. The claim for gratuity against the company in liquidation is unavailable to the applicant and it is for the applicant to make necessary application before the Trust to recover the said sum. In the event, the Trust declines to make payment of the gratuity to the applicant, on the premise that the company in liquidation has not made over the said sum towards gratuity payment, it is open for the applicant to make necessary application before this Court.