Raj Kumar and Others vs Presiding Officer, Industrial Tribunal-Cum-Labour Court and Another

K. Kannan, J.—By virtue of the impugned order, the Labour Court fettered its own trial on an application filed by the Management u/s 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as ''SICA''). The Management-Company is said to have been registered with BIFR under SICA and an application had been taken by the Management u/s 22 stating that the legal proceedings before the Labour Court shall also remain stayed by virtue of the operation of Section 22. The application was allowed and the proceedings were stayed.

The learned Counsel appearing on behalf of the workman contends that operation of Section 22 that shall remain suspended, as contemplated by Section 22 shall be only for the matter enumerated under the Section. Section 22(1 )(2) and (3) read thus:

Suspension of legal proceedings, contracts, etc.- (1) Where in respect of an industrial company, an inquiry u/s 16 is pending, or any scheme referred to u/s 17 is under preparation or consideration, or a sanctioned scheme is under implementation, or where an appeal u/s 25 relating to an industrial company is pending, then notwithstanding anything contained in the Companies Act, 1956 (1 of 1956); or any other law or the memorandum and articles of association of the industrial company, or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company, or for execution, distress or the like against any of the properties of the industrial company, or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of loans or advance granted to the industrial company, or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.

2) Where the management of the sick industrial company is taken over or changed in pursuance of any scheme sanctioned u/s 18, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law:

(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company;

(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) Where an enquiry u/s 16 is pending or any scheme referred to in Section 17 is under preparation or during the period of consideration of any scheme u/s 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which suck sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adoptions and in such manner as may be specified by the Board:

Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate.

In the first portion of the Sub-section (1) the proceedings that shall lie suspended shall be proceedings for winding up or for execution, distress or the like against any of any of the properties of the industrial company, or for the appointment of a receiver or a suit for recovery of money or for enforcement of a security against the industrial company, or of any guarantee in respect of any loans or advance. Sub-section (3) provides that if an enquiry u/s 16 is pending relating to the Industrial sickness of the Company or any scheme as contemplated u/s 17 is under preparation or if there is a consideration of any scheme as contemplated u/s 18 or where any such scheme is sanctioned thereunder ,for due implementation of the scheme, the Board may by order declare with respect to the Sick Industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements. Settlements. award, standing party or other instruments in force to which a Company is a party shall remain suspended. Learned Counsel appearing on behalf of the respondent would state that the proceedings before the Labour Court shall ultimately lead to award for the workman, if the latter'' s contention were accepted. According to him, therefore, Sub-section (3) will operate to suspend the proceedings. It is one thing to suspend proceedings which are pending before the Courts which is contemplated u/s 22(1) but quite another that there may arise enforcement of a scheme under any award or enforcement of a scheme which is contemplated under any of the provisions of the SICA itself. The point has been referred to in the decision of Hon''ble Supreme Court in Morgan Securities and Credit Pvt. Ltd. Vs. Modi Rubber Ltd., where the Supreme Court has dealt with the scope of Section 22(3). It is pointed out that the distinction essentially is that the suspension of proceedings operates automatically u/s 22(1) while u/s 22(3) the Court is required to apply it, having regard to the facts and circumstances of each case with order passed by the Board in exercise of its jurisdiction directing the parties not to continue proceedings. The matters shall be kept in abeyance so as to enable the Board to pass appropriate orders. Admittedly no such order has been passed by BIFR. The order of the Labour Court staying the proceedings u/s 22 is, therefore, not legally tenable. The impugned order is set aside and the writ petition is allowed.

Learned Counsel for the respondent states that the claims of several other workman have been settled by the Management and there could be a similar attempt by the Management to work out amicable settlement with them. None of my observations made in this order will constitute any impediment to either party to arrive at a settlement. The writ petition is allowed and the order of stay granted by the Labour Court is set aside.