S ANTHONY RAJ Vs. A SHANMUGAM

JUDGEMENT

(1.) THE first respondent has filed C. A. No. 206 of 1992 and C. A. No. 207 of 1992, the first in his individual capacity and the second in his capacity as the vice-president of the Madras Pen and Ink Factories Workers' Union. A learned single judge of this court has in the applications held that (i) the workmen, who become secured creditors by operation of law from the date of the winding up order, have a pari passu charge over the security which is held by the secured creditors under the contract; (ii) the cut-off date for arriving at the ratio at which the sale proceeds should be divided on a pari passu basis as per section 529 of the Companies Act, 1956, should be the date of the winding up order and not the date of sale; and (iii) the workmen are entitled to claim interest from the date of the winding up order till the date of realisation of security. He (the learned single judge) has set aside the order of the official liquidator determining the closure compensation and the payment of interest on the admitted amount. To have a grip on the controversy between the parties we may notice some of the relevant facts at the outset. The company known as Pilot Pen Co. (India) P. Ltd. has gone into liquidation and has been ordered to be wound up on October 27, 1978, in C. P. No. 11 of 1978. Consequent on the passage of the winding up order, the official liquidator has entered upon his duties and taken control and possession of the administration and properties of the company. The liquidator took up the claim of the workmen in which, however, he himself posed a question whether the undertaking of the company in liquidation was closed down on account of unavoidable circumstances beyond the control of the employer, and found that the undertaking of the company in liquidation was closed down with effect from October 27, 1978, consequent on the winding-up order and concluded that since the closure was due to unavoidable circumstances beyond the control of the company in liquidation, for, it was closed down due to the winding-up order, the claim should be to closure compensation to the extent provided under the proviso to section 25fff (1) of the Industrial Disputes Act. The two applications were brought before the court by the applicant respondent, Shanmugham, seeking to quash the official liquidator's order so far as it related to the closure compensation and also to direct payment of interest at 18 per cent per annum on the admitted amount and accordingly to set aside all orders in the proceedings relating to the claim of the workmen.

(2.) THE learned company judge has held that the closure of the company was not due to unavoidable circumstances beyond the control of the company, that the workmen would be entitled to closure compensation as prescribed under the first part of section 25fff (1) of the Act and that the workmen, on the operation of law, having been given the status of the secured creditors are entitled to the above benefits of compensation with interest as prayed for.

(3.) TWO of the members of the board of directors of the company under liquidation, one who held the office of the managing director and the other that of a director have come in appeal before us and raised various grounds. Learned counsel for the appellants has contended that the explanation given by the learned single judge, as per the provisions in section 25fff (1) of the Act, is not correct, and is against the judicial consensus in the sense that such a provision should be strictly construed bearing in mind the Explanation which sets out the circumstances which shall not be deemed to be unavoidable circumstances beyond the control of the employer. Section 25fff of the Act, which has undergone several amendments, reads as follows :