Andhra National Textile Workers Union vs Commissioner of Labour and Others

One of the oldest Spinning Mills in the State is facing extinction. The fate of more than 1150 workmen is hanging in the air for more than six years. This Court is called upon to resurrect the situation to extricate the Mill and dependent Mill workers.

This Writ petition is filed by the President of the Andhra National Textile Workers Union. The Andhra Co-operative Spinning Mills Limited, Guntakal was established in 1950s under the A.P. Coperative Societies Act and had worked upto July, 1991. It has been working under the control of the A.P. Spinning Federation Lay off was declared by the Mill on 29-7-1991 but no lay off compensation or wages were paid to the workmen. While so, the Government issued GO.Ms.No.133, dated: 21-3-1992 by invoking the powers of subsections (1) and (2) of Section 3 of A.P. Relief Undertakings (Special Provisions) Act, 1971 declaring the said Mill as a Relief undertaking with effect from 21-3-1992. Initially, it covered for a period of 12 months and subsequently, it was being extended from time to time. Finally, the extension was valid unto 20-3-1995 and thereafter, no further extension was given.

It is the case of the petitioners that by virtue of the notification issued under the Act, they were prohibited from approaching the authorities under the Industrial Disputes Act and they were not paid the lay off and other wages. Having no other forum to agitate the matter, they approached this Court seeking directions to pay the salaries. It is also their case that a sum of Rs.3,200/-each was paid to the workmen employed in the Mill. In fact, they are entitled for higher amounts.

In the main writ petition, counter affidavit was filed on behalf of the respondents. It was accepted that notification was issued declaring the Mill as a Relief Undertaking. The Mill ran into severe difficulties due to lack of cotton supply, working capital and very low productivity of the workers. Consequently, the cumulative effect was that the Mill could not be worked at all as no funds could be generated by the Mill even to meet its daily running expenditure. The Government has advanced huge sums of money and stood guarantee for several financial institutions including Industrial Development Bank of India. It is also the case of the Government that a sum of Rs.55.38 lakhs was spent towards payment of salaries and other benefits to the workmen. The Andhra Cooperative Spinning Mills Limited, Guntakal was established in the year 1954. The financial position of the Mill became very precarious for the last several years and therefore, it was closed on 27-7-1991. A Project Report was prepared to reopen the Mill at an estimated cost of Rs.750 lakhs with modem machinery. Efforts are being made to revive the Mill. Unless the funds are made available, there is no scope for payment of further money to the workmen.

The issue that arises for consideration of this Court is whether the workmen are entitled for any relief?

The learned Advocate General appearing on behalf of the respondents submits that the Government cannot be made liable to pay any sum to the petitioners as the Mill itself is closed and that the Mill is an independent entity governed by the provisions of the A.P. Cooperative Societies Act. More over, a Receiver was appointed by the High Court of Bombay and it is open for the petitioners to implead themselves before the High Court of Bombay and claim for pro rata sum. It is also submitted that the High Court of Bombay has ordered the sale of property by the Receiver and in pursuance of the same, the sale proceedings are taking place. The learned Advocate General submits that Government made efforts to rehabilitate the Spinning Mill, but it was found not feasible. The only course that is available on the basis of present situation, the learned Advocate General submits, is that the Cooperative Spinning Mills is governed by the provisions of the A.P. Cooperative Societies Act and that in view of the fact that the very purpose of promoting the object for which the Mill was established has been frustrated, the Court may consider winding up of the mill under the Act, so that the interest of the workmen as well as the Mill could be better protected. He, further submits that though the scope of writ petition was confined to the ways of the workers yet in view of the prevailing situation, permanent solution to the problem may be carved out by appropriate orders. The learned Counsel for the petitioners and the other learned Counsel appearing for other respondents have also expressed their support to the submission of the learned Advocate General.

The factual matrix of the affairs of the Mill can be traced to the required extent, The Mill went into commercial production from 8-2-1954. On account of various factors, the operational performance of the Mill developed, decline trend and ultimately it stopped the functioning of the Mill due to acute financial position with effect from 26-7-1991. Accordingly, all the workmen of the Mill are laid off from the said date and they were also not paid lay-off compensation nor the wages nor any terminal benefits. The Industrial Development Bank of India (for short I.D.B.I.) filed Suit No.4728/1993 in Mumbai High Court for recovery of a sum of Rs.96,12,000/- towards balance principal and interest amounts due to it which is pending. The High Court by orders dated: 14-1-1994 also appointed an Advocate-Receiver (Respondent No. 8) to take charge of the assets. It also appears that High Court also ordered payment of Rs.2 lakhs per month which could not be complied with by the Mills and an order was passed on 6-6-1995 and 25-7-1995 for taking possession of A,B, and C schedule properties by taking proper inventory. The Court also passed orders for sale of B and C schedule properties. It is also brought to the notice of this Court that sale notification was issued and that certain offers have been received from various firms and the Government of Andhra Pradesh appears to have made certain proposals with regard to valuation of the assets, but the fact remains that the sale has not been finalised and confirmed by the High Court so far.

It is unfortunate that the I.D.B.I. and the Receiver, who were impleaded as parties to the proceedings, even though they were served with proper material did not choose to appeal'' before this Court or file their returns. The I.D.B.I. being instrumentality of State cannot be expected to adopt such an attitude, more especially when their counter is necessary for proper determination of the issue. It is needless to sate that when notices are served on the parties, more especially, on the authorities answering to the definition of ''State'' or ''Instrumentalities of State'', they are duty bound to respond to the notices. Constitutional duty is cast on the Bank which is the State under Article 12 of the Constitution to act fairly and reasonably. This Court prima facie finds that there is a clear dereliction of the duties of the officers and though intended to initiate appropriate proceedings against the officers concerned for not responding to the Nonces issued by this Court, this Court directs that the Managing Director shall cause an enquiry into the matter and ascertain under what circumstances the Officers of the I.D.B.I. failed to appear before this Court and file their returns. The Managing Director is further directed to fix the responsibility on the concerned officers and proceed against them in accordance with the relevant disciplinary rules. This Court also finds that there was no response or any assistance by the Court Receiver (Respondent No.8),

The learned Advocate General appearing on behalf of the State fairly concedes that the Textile Industry has virtually become defunct in all its aspects. The Government also tried its level best to extricate the Cooperative Society and. rehabilitate by additional capital and inputs, but, yet the Government have found that the Unit has reached irreparable stage and the only alternative the learned Advocate General suggests is that it is a fit case where it has to be wound up being a cooperative society under the provisions of the A.P. Cooperative Societies Act. Such a situation would be in the interest of the cooperative society and also it protects the assets of the Company as well as take care of the amounts due to the outsiders. The learned Advocate General also submits that the assets of the Mill both movable and immovable are worth more than Rs.25 crores. In pursuance of the interim orders of this Court, the Government appears to have advanced some amounts and they were paid to the Workmen, but, however, large sums of amounts are yet to be paid. He further submits in the detailed explanations furnished to the Mumbai High Court in respect of the value of the assets put up for sale by the Receiver, it was also stated by the Government that the following sums are due to the workmen and they have to be paid to the workmen being statutory dues.

"Payment of dues to the workers to be paid:

(a) Lay-off compensation: As per Section 25C of I.D.

Act 1947 the management has to pay 45 days wages per every 12 months as lay-off compensation for 1154 workers: Rs.269.63 lakhs

(b) Gratuity payable as per Gratuity Act: For every completed year of service the workmen have to be paid 15 days wages as gratuity: Rs.170.37 lakhs (c) Closure compensation: As per Sec.25 FFF of I.D. Act, 1947 the workmen have to be paid closure compensation at the rate of 15 days wages for every completed year of service Rs.170.37 Lakhs. (d) Statutory dues like P.F.& E.S.I, to be paid by the Management: Rs. 48.00 lakhs (e) Outstanding wages to the workers at the time of closure: Rs. 16.31 lakhs ----------------- Total: Rs.674.68 lakhs -----------------

This amount did not include the wages payable to the workmen. He says that when the Society is not able to function in accordance with the provisions of the Act and its affairs are being conducted in a manner detrimental to the promotion of objects for which the Society has been registered, it is open for the authorities to take appropriate action under the provisions of the A.P.Co-operative Societies Act. It is now clear from the facts enumerated above that the Society is incapable of being revived under any circumstances and the only alternative is to protect the properties of the society and the amounts due to the Society, so also the interest of the creditors, and it can be safely concluded that the society is no more in a position either to permit or to carry on its objects for which it has been registered. It is also submitted by the learned Advocate General that the Government also advanced certain sums for payment of salaries and other allowances to the society and it would not be possible for the Government to get the amounts unless the appropriate orders are passed.

I have considered the submissions of the learned Advocate General and the learned Counsel for the parties. The situation as obtaining today would speak for itself The Mill has come to stand still and it is not being operated from 26-7-1991 in continuation of declaration of lay off by the management. The efforts from all the quarters including the Government to revive the unit proved to be unsuccessful. The Mill has lost its substratum, and its revival reached the point of no return. The State Government also pumped huge amounts and made earnest efforts to rehabilitate the unit, yet the attempts resulted in futility. Even the notification issued by the Government declaring the Mill as relief undertaking under the provisions of A.P. Relief Undertaking (Special Provisions) Act, 1971 for purpose of preventing unemployment yielded negative results. The Mill which is established under the Cooperative Societies Act is neither serving the members nor conducting/promoting its affairs for furtherance of its objects for which the Mill was registered. In this scenario of situation, the inevitable conclusion is that the Cooperative venture was a failure. The net consequential results is that more than 1000 workers who have been eking out their livelihood for the last several decades are thrown out of their employment. Though the thread of master and servant relationship continues, yet it is purely imaginary and for all practical purposes except their names appearing on the rolls of the Mill. They are neither retrenched nor terminated in accordance with the provisions of Industrial Disputes Act, after expiry of lay off period. Under these circumstances, this Court is of the considered opinion that it is a Ct case where the Mill should be wound up in accordance with the Chapter IX of the A. P. Cooperative Societies Act. Under the said provisions, it is the prerogative of the Registrar of the Cooperative Societies to pass the orders of winding up of the society u/s 64 of the Act when it is of the opinion that the Society failed to conduct its affairs for the promotion of the objects for which it has been registered. It is also open for the Registrar to pass orders for winding up of the society if the society has ceased to work for the last three years. But, having considered the matter at length in this writ petition and also taking stock of overall situation of the Mill, I am inclined to exercise the plenary powers vested in this Court under Article 226 of the Constitution of India for advancing the cause of justice by passing appropriate orders instead of directing the Registrar to pass the orders u/s 64 of the Act. The Supreme Court in Gujarat Steel -Tubes Limited vs. Its Mazdoor Sabha, 1980 L.I.C. 1004 observed in para 73 as follows :

"While the remedy under Article 226 is extraordinary and is of Anglo-Saxon Vintage, it is not a carbon copy of English processes, Article 226 is a sparing surgery but the lancet operates where injustice suppurates. While traditional restraints like availability of alternative remedy hold back the Court, and judicial power should not ordinarily rush in where the other two branches fear to tread, judicial daring is not daunted where glaring injustice demands even affirmative action. The wide words of Article 226 are designed for service of the lowly numbers in their grievances if the subject belongs to the Court''s province and the remedy is appropriate to the judicial process. There is a native hue about Article 226, without being anglophiles or Anglophobic in attitude. Viewed from this jurisprudential perspective, we have to be cautious both in not overstepping as if Article 226 were as large as an appeal and not failing to intervene where a grave error has crept in. Moreover, we sit here in appeal over the High Court''s judgment. And an appellate power interferes not when the order appealed is not right but only when it is clearly wrong. The difference is real, though fine".

Justice Krishna Iyer speaking for the majority observed that Article 226, however, restrictive in practice, is a power wide enough in all conscience to be a friend in need when the summons comes up in a crisis from a victim of injustice; and more importantly, this extraordinary reserved power is unsheathed to grant final relief without necessary recourse to remand. What the Tribunal may in its discretion do the High Court too under Article 226 can, if facts compel to do.

Keeping the above principles in view, I direct that the 3rd respondent Mill M/s. Andhra Cooperative Spinning Mills Ltd. Guntakal, shall be wound-up with effect from 31-12-1997 and accordingly it shall be deemed to have been wound up with effect from31-12-1997. This order shall be treated as an order u/s 64 of the AP. Cooperative Societies Act Consequently, the following directions are issued:

(1) The Registrar is empowered to appoint the Liquidators u/s 65 of the Act, but, however, in view of the fact that the workmen have been out of job for several years and their amounts have not been settled in respect of Provident Fund, Gratuity, Lay-off compensation and other wages etc. So far, this Court feels that the Advocates should be appointed as Liquidators and accordingly direct the Registrar to appoint Smt. M. Bhaskara Lakshmi and Smt E. Urmila Advocates, as Liquidators and they shall be treated as it they were appointed u/s 65. They shall perform the functions under Sections 65 and 66 of the AP. Cooperative Societies Act and the Rules framed there under.

(2) The Liquidators shall function subject to the advice and directions issued by the Registrar from time to time. The Liquidators shall forthwith proceed with the matter in accordance with the provisions of the Act and the Rules framed there under, more especially Rule 51 of the A.P. Cooperative Societies Rules subject to the orders in operation issued by the High Court, Mumbai in Suit No.4728/1993.

(3) The Liquidators shall also take steps to get the attachment before judgment raised by the High Court of Mumbai or seek any directions from the High Court as they think appropriate for the early completion of winding up process of the Mill. If any conditions with regard to security to be furnished by the Mill are stipulated by the Court, the State Government shall give appropriate security for the release of the assets,

(4) The Liquidators shall be paid a sum of Rs.5,000/- each per month. They shall be reimbursed the actual expenses spent by them towards the ministerial assistance, conveyance both in the city limits and outside city. Whenever they are required to travel beyond twin cities, they shall be reimbursed the actuals of travel expenses, accommodation etc.

(5) The State Government shall make a deposit of Rs. 1,00,000/- within three weeks from today towards the liquidation costs initially. This amount shall be placed at the disposal of the Registrar of Cooperative Societies, who is authorised to release the liquidation expenses including the remuneration of the Liquidators from time to time. In case of requirement of additional funds for the purpose, the same shall be made available to the Registrar.

(6) The Liquidators shall take charge of the assets of the Company forthwith subject to the attachment orders passed by the Mumbai High Court, exercise the powers u/s 66 of the Act and deal with the said properly in accordance with the provisions of the Cooperative Societies Act and the Rules framed thereunder.

(7) The Registrar of Cooperative Societies shall oversee and monitor the liquidation proceedings and render proper advice to the liquidators as well as the Managing Director of the Company to ensure that the proper procedure is being followed and that the interest of the Society is protected in the best possible manner.

(8) The services of the employees (workmen, staff and officers) shall be deemed to have been terminated with effect from 31-12-1997. However, the employees are entitled for wages only upto 31-7-1995 i.e. date of filing of the writ petition.

(9) It is open for the workmen to make any additional claims towards compensation, wages etc. before the Liquidators and the same shall be decided after hearing the Company and the workmen.

(10) Since the workmen are not paid for the last several years and their services are also not terminated as on today and the relationship of Master and Servant is still continued, it is also necessary that the workmen are given certain financial assistance, pending finalisation of their amounts and I accordingly direct that all the workmen including the staff and officers shall be paid a sum of equivalent to six months monthly emoluments drawn by each of them. The emoluments shall be reckoned with reference to the wages they had drawn in the month of July, 1991. The Managing Director shall intimate the State Government about the quantum of the amount so arrived and the State Government shall place the same at the disposal of the Managing Director within a period of four weeks from the date of placing the requisition. On receipt of the amount, the Managing Director shall disburse the amount to the workmen, staff and officers. This amount shall be recovered from the amounts that become payable to them consequent on the winding up of the society.

(11) The liquidation expenses and the amounts advanced by the Government in pursuance of this order and the amounts already advanced by the Government to the society in pursuance of the earlier orders of this Court shall be deducted from the amounts realised on account of winding up order and credited to the Government,

(12) It is open for the Liquidators or the Managing Director or the Registrar to seek appropriate directions from the Government from time to time for the effective implementation of the orders of this Court

(13) As there is a bar for proceeding with the civil suits u/s 121(2) of the A.P. Cooperative Societies Act, the I.D.B.I. shall make application to the Registrar of the Cooperative Societies seeking permission and the same shall be granted without loss of time so as to prosecute the suit pending before the Mumbai High Court.

(14) The entire process of winding up shall be completed within a period of six months or such other extended period as may be fixed by this Court.

(15) The learned Advocate General assisted by the learned Govt. Pleader Mr. J. V. Suryanarayana and Mr. P. V. S. S. S. Rama Rao have greatly assisted this Court with their mature submissions. The Court appreciates and places on record their invaluable assistance rendered for the final determination of the case.

The writ petition is disposed off accordingly. No costs.