SUPREME COURT OF INDIA
Punjab Wireless Systems Employees Union
Vs
Winsome Yarns Limited and Others
Appeal (Civil) 3490 of 2006 (Arising Out of Slp) Nos.24032-33/2005) With (Ca Nos 3491 / 2006 @ Slp ) Nos.24547-48/2005)
(H. K. Sema and R.V. Raveendran, JJ)
08.08.2006
H.K.SEMA, J.
Leave granted.
These appeals arise from the order dated 6.10.2005 of the Punjab & Haryana
High Court in Company Appeal No. 11/2005.
2. Punjab Wireless Systems Employees Union (the appellant in the first batch
and 11th Respondent in the second batch, and for short "Employees'
Union") claims to be a Union representing the employees of the Punjab
Wireless Systems Ltd. which is in liquidation (second respondent in both
batches of appeals, for short the 'company' or 'PUNWIRE'). M/s. Winsome Yarns
Ltd. (first respondent in both batches, for short 'WINSOME') is the purchaser
of Items 17, 19 and 20 from out of the assets of PUNWIRE under sale notice
dated 15.6.2004 issued by the official liquidator. Respondents 3 to 10 are the
banks/financial institutions which are the creditors of PUNWIRE. M/s. Sungroup
Enterprises Pvt. Ltd. (Respondent No. 11 in the first batch and Appellant in
the second batch, for short 'SUNGROUP') is a company interested in purchasing
Item Nos.17, 19 and 20.
3. M/s Punjab Wireless systems Ltd was ordered to be wound up on 1.2.2001. On
4.1.2003, the learned Company Judge permitted the official liquidator to sell
the assets of PUNWIRE. A Sale Committee was constituted (consisting of the Official
Liquidator and two of the major creditors, namely, Canara Bank and IFCI), to
work out the modalities of sale. The Sale Committee divided the assets of
PUNWIRE to be sold into 25 separate lots, for convenient sale. The official
liquidator issued a sale notification dated 15.6.2004 inviting sealed tenders.
The sale notice was widely published on 25.6.2004 in leading newspapers that is
Economic Times, Times of India, The Tribune (all India editions), Punjab Kesari
(Ambala, Delhi & Jallandhar editions Hindi) and Jagbani (Jallandhar edition
Punjabi). Items 17, 19 and 20 with which we are concerned in these appeals, and
their reserve price as per the sale notice dated 15.6.2004 were as under :
i) Item 17 : Industrial Plot bearing No.B-77, Phase VII, Industrial Area,
Mohali (near Chandigarh), Punjab, measuring 14, 550 sq.yds. with the structures
thereon (reserve price Rs.3 crores)
ii) Item 19: Furniture in item no. 17 (reserve price Rs.4 lakhs)
iii) Item 20: Air-conditioners and generator sets in item no. 17 (reserve price
Rs.15 lakhs).
The sale notice reserved the power to reject any offer or to allow inter se
bidding in the official liquidator and the Sale Committee. It also made it
clear that sale will be subject to confirmation by the learned Company Judge.
4. WINSOME gave its offers in regard to three items, that is Rs.3.14 crores for
Item No.17, Rs.4.5 lakhs for Item No.19 and Rs.15.5 lakhs for Item No.20. At
its meeting held on 27.7.2004, the Sale Committee decided to retain the offer
of WINSOME in regard to item no. 17 until the machinery, furniture and fittings
(Items 18, 19, 20) kept in the premises were disposed of. At its further
meeting held on 28.7.2004, the Sale Committee resolved to invite WINSOME to buy
Item Nos.17, 18, 19 and 20, (that is, the three items for which it had made
offers as also Item No.18 (- machineries installed in Item No.17) at a total
price of Rs.5 crores, the price being subject to negotiations, if WINSOME so
desired. WINSOME did not agree. On 10.12.2004 there was an inter se bidding
among WINSOME and two other tenderers, namely, M/s. Star Point Financial
Services Ltd. and M/s. S.K. Khaitan Pvt. Ltd., WINSOME increased the offer in
respect of Item No. 17 to Rs. 3.16 crores. There was no increase in its offer
for items 19 and 20. The learned Company Judge, by his order dated 10.12.2004,
accepted the offer of WINSOME at Rs.3.36 crores for Items 17, 19 and 20 and
confirmed the sale of these items in favour of WINSOME. The order dated
10.12.2004 was clarified on 13.1.2005.
5. WINSOME deposited the balance of the sale price on 13.12.2004 and possession
of Items 17, 19 and 20 was delivered to WINSOME on 16.12.2004. As Plot No.B-77
comprised in item No. 17 was a leasehold property taken on lease from Punjab
Small Industries & Export Corporation Ltd. (PSIEC), the Official Liquidator
gave a no objection certificate for transfer of the lease from the name of
PUNWIRE to the name of WINSOME on 29.12.2004. In pursuance of it, WINSOME
applied to PSIEC for transfer of the lease in its favour. On payment of a
transfer fee of Rs.11, 78, 550/-, the lease in respect of plot No. B-77 was
transferred to WINSOME and a lease deed dated 25.10.2005 has been executed and
registered between PSIEC and WINSOME, the period of lease being 99 years from
the date of allotment to the original allottee.
6. SUNGROUP filed C.A. No.72/2005 in January, 2005, offering to take over the
entire assets of PUNWIRE (Items 1 to 25) as a going concern for a price of
Rs.12 crores. The Company Court directed SUNGROUP to deposit a sum of Rs.2
crores with the official liquidator to establish its bona fides, as a condition
for entertaining the application. SUNGROUP deposited the said sum of Rs.2
crores. On 11.2.2005, SUNGROUP raised its offer for the total assets (Items 1
to 25) to Rs.14 crores. The price offered by SUNGROUP for Items 17, 19 and 20
(out of the total price offered) was Rs. 353.2 lakhs for item No.17, Rs. 1.25
lakhs for item No.19 and Rs. 2.40 lakhs for item No.20 in all, Rs.356.85 lakhs,
as against the price of Rs.336 lakhs paid by WINSOME. The Employees Union also
filed objections dated 11.2.2005 to the sale in favour of WINSOME contending
that they were vitally interested in the sale of the assets and that the sale
in favour of WINSOME without notice to the workers, was liable to be set aside.
The Employees Union was of the view that if SUNGROUP took over the entire
assets of PUNWIRE as a going concern, there was a reasonable chance of PUNWIRE
employees being employed.
7. The learned Company Judge by order dated 30.3.2005 allowed the application
of SUNGROUP in part and set aside the confirmation of sale dated 10.12.2004 (as
clarified on 13.1.2005) and directed to WINSOME to deliver back possession of
Items 17, 19 and 20 to the Official Liquidator. The Company Court held that
WINSOME will be entitled to the refund of the sale price along with the
interest paid by it to its bankers on the loans taken by it, on submission of a
bill for interest based on actuals. The court directed that SUNGROUP should
bear and pay the said interest as also the expenses relating to re-auction of
Items 17, 19 and 20.
8. The said order was challenged by WINSOME, in Company Appeal No.11/2005. A
Division Bench of the Punjab & Haryana High Court by order dated 6.10.2005 allowed
the said appeal, set aside the order dated 30.3.2005 of the learned Company
Judge and restored the order dated 10.12.2004 (as clarified on 13.1.2005)
confirming the sale in favour of WINSOME. The Division Bench directed the
Official Liquidator to complete all formalities in regard to the sale in favour
of WINSOME and further directed the return of Rs.2 crores to SUNGROUP. The
order of the Division Bench is challenged by the Employees' Union in the first
batch of appeals and by SUNGROUP in the second batch of appeals.
9. SUNGROUP contends that the sale price at which Items 17, 19 and 20 were sold
to WINSOME was very low. It relied on the minutes of the meeting dated
28.7.2004 of the Sale Committee to get a fair indication of the market value.
It pointed out that the Sale Committee had expressed the view that the price
should be Rs.5 crores for item Nos.17, 18, 19 and 20 which would mean that the
market price of item no. 17 (B-77, Mohali Industrial Area, Phase-VII) was at
least Rs.4.5 crores. It, therefore, contended that the price of Rs.3.16 crores
realized for Item No.17 very low. SUNGROUP next submitted that the adjoining
plot of equal dimension (that is Plot No.B-76 - lot No.10) was purchased by
SUNGROUP on 20.4.2006 for a price of Rs.11.6 crores and that if the price for
Item No.17 is worked back on that basis by deducting the annual appreciation
for two years at the rate of about 15% to 20% per year, the price of item no.
17 would have been around not less than Rs.6 to 7 crores, in the year 2004. It
also alleged that one of the bidders at the inter-se bidding on 10.12.2004,
namely Star Point Financial Services Ltd., was a sister company of WINSOME and
therefore the sale was not legal.
10. The Employees' Union adopted the contentions urged by SUNGROUP and in
addition submitted that notice should have been issued by the Company Court to
it before confirming the sale in favour of WINSOME as the employees were
vitally interested in the outcome of the sale. The Employees' Union also
submitted that large amounts were due to the employees and unless a good price
was received, the employees would be adversely affected. It was further
contended that learned Company Judge, being the custodian of the assets of the
company under liquidation, had tried, by its order dated 30.3.2005, to ensure
that the maximum price was secured for the assets and therefore the Division
Bench ought not to have interfered with the said order of the Company Judge
setting aside the sale in favour of WINSOME. It also submitted that if SUNGROUP
is permitted to take Item No.17 at Rs.11.6 crores, the price at which SUNGROUP
had purchased the adjoining property (Item No.10), it will benefit the workers
and creditors of the Company.
11. On the other hand WINSOME contended that they had purchased Items 17, 19
and 20 at the then prevailing market price. WINSOME pointed out that in spite
of wide publicity, there were no better offers and the Sale Committee at its
meeting held on 27.7.2004 had proposed to accept its bid of Rs.3.14 crores.
Referring to the minutes of the meeting of the Sale Committee on 28.7.2004, it
was submitted that the Committee had merely suggested that WINSOME should be
requested to purchase Item Nos.17 to 20, which included the machinery for which
it had not made any offer, for Rs.5 crores, making it clear that it was only an
asking price, open to negotiations. It is contended that the sum of Rs.5 crores
referred to by the Sale Committee was not an indication of the market price of
Item No. 17 as Rs.4.5 crores but only an attempt by the creditor banks to
maximize the sale price receivable for Items 18 to 20. Strong reliance was also
placed on the fact that SUNGROUP itself had offered only Rs.3.53 crores for
Item No. 17 in February, 2005, when it sought the setting aside of the sale in
favour of WINSOME which showed that the price was only around Rs.3 crores when
it made its offer in July, 2004. It is contended that as there were no
irregularities in the sale, the sale could not be set aside, even if for any
reason, the price paid by it is held to be marginally lower than the then
prevailing market price. Insofar as the purchase of the adjoining plot by
SUNGROUP on 20.4.2006 for Rs.11.6 crores, it was contended that the said sale
was nearly 21 months after the sale of item no. 17 and therefore, could not be
a yardstick for determining whether the sale price paid for item no. 17 was
proper and reasonable, particularly as there was an enormous spurt in prices
after it purchased the plot. Lastly it is contended that the sale having been
confirmed and the PSIEC having executed the registered lease deed in their
favour the question of interfering with the sale does not arise.
12. After the matter was argued for sometime the learned counsel for SUNGROUP
submitted that having purchased the adjoining property, they were interested in
purchasing Plot No.B-77 also and SUNGROUP was willing to offer the same price
of Rs.11.6 crores for the property (Item No. 17). Learned counsel for the
Employees' Union submitted that in the interest of workers, WINSOME should take
a reasonable profit and give up the property in favour of SUNGROUP so that the
workers and creditors will be benefited. At this stage, learned counsel for
SUNGROUP stated that being interested in the welfare of the workers, in addition
to the price of Rs.11.6 crores offered by them for Item No.17, it will also pay
ex gratia, a sum of Rs.50 lakhs to the employees of PUNWIRE, as they have been
without salary for quite sometime. In view of these submissions, we queried the
learned counsel for WINSOME as to whether WINSOME was interested in considering
the offer of SUNGROUP.
13. Learned counsel for WINSOME took time and after obtaining instructions,
submitted, though with some reluctance, that WINSOME was agreeable for the
proposal, provided it received a sum of Rs.6.36 crores for items 17, 19, &
20 (made up of Rs.3.36 crores towards the refund of price and Rs.3 crores
towards interest, expenses and compensation for deprivation of its property. He
submitted that WINSOME had taken a great risk by borrowing huge amounts from
the banks for purchasing the property and that a sum of Rs.1.64 crores is due
to Canara Bank and Rs.1.38 crores is due to the State Bank of Patiala
(respondents 4 & 6 herein). He also submitted that subject to payment of Rs.6.36
crores, WINSOME had no objection either for transfer of its rights to SUNGROUP,
or for the sale in its favour being set aside and a fresh sale being confirmed
in favour of SUNGROUP.
14. There was no objection to the proposal by the other parties, obviously
having regard to the fact that everyone is benefited by the said arrangement.
In view of the above we consider it a fit case to exercise our power under Art.
142 of the Constitution, and accept the settlement as proposed in the larger
interest of parties and to benefit the workmen. We make it clear that the sale
which has already been confirmed in favour of WINSOME, is set aside, not on
merits, but in pursuance of the negotiated settlement arrived at among
SUNGROUP, the Employees' Union and WINSOME. Accordingly, we allow these appeals
in part accepting the settlement on the following items:
i) SUNGROUP shall pay a sum of Rs.6.36 crores to WINSOME towards the refund of
the sale price and as compensation for depriving WINSOME from the enduring
benefit of its capital asset, in the following manner :
a) Rs. 1.64 crores by Demand Draft drawn in favour of Canara Bank, Sector 35B,
Chandigarh, to the account of WINSOME, in repayment of the loan taken for
purchasing item 17.
b) Rs. 1.38 crores by demand draft drawn in favour of State Bank of Patiala,
Commercial Branch, SCO 103- 107, Sector 8C, Chandigarh, to the account of
WINSOME, in repayment of the loan taken for purchasing item 17.
c) Rs.3.34 crores by two demand drafts for Rs.3 crores and Rs.34 lakhs
respectively drawn in the name of WINSOME payable at Chandigarh.
ii) SUNGROUP shall pay a sum of Rs.5.24 crores to PUNWIRE (company in
liquidation) represented by the official liquidator, towards the price of Item
No.17 in the following manner:
a) Rs. 2 crores by authorizing the Official Liquidator to adjust the deposit
already made by SUNGROUP.
b) Rs.3.24 crores by demand draft drawn in the name of Official Liquidator,
High Court of Punjab & Haryana, to the account of company in liquidation
(PUNWIRE).
iii) On payment of the amounts as aforesaid, the official liquidator shall file
a report with the Company Judge confirming the receipt of Rs.8.6 crores as full
sale price for Item No. 17, 19 and in the following manner :
a) Rs.3.36 crores received from WINSOME and adjusted towards the sale price.
b) Rs.2 crores deposited by SUNGROUP and adjusted towards the price.
c) Rs.3.24 crores received by way of demand draft from SUNGROUP.
The price of Rs.8.6 crores so received shall be dealt with as per directions of
the learned Company Judge.
iv) PUNWIRE, the company under liquidation shall be entitled to retain any
interest accrued on Rs.3.36 crores and Rs.2 crores till date, without being
liable to refund or account for the same either to WINSOME or to SUNGROUP.
v) On receipt of the payments as aforesaid by WINSOME and the Official
Liquidator, the sale in favour of WINSOME in respect of items 17, 19, 20 shall
stand set aside and sale of said item No.17(Plot No. B.77 and structures
thereon) shall stand confirmed in favour of SUNGROUP. The Official Liquidator
shall issue a fresh NOC to enable SUNGROUP to obtain transfer of lease from
PSIEC in respect of Plot No. B-77.
vi) On receipt of the demand drafts aggregating to Rs.6.36 crores as detailed
in para (i) above, WINSOME shall
a) Issue a letter of request for cancellation of the existing lease deed in its
favour so as to enable SUNGROUP to secure a fresh lease deed in its favour by
PSIEC. (The cost of execution of fresh documents in that behalf shall be borne
by SUNGROUP);
b) Deliver possession of item 17 to SUNGROUP in the presence of the official
liquidator on "as is where is" basis;
c) Deliver possession of Items 19 and 20 to Official Liquidator;
d) Do all acts as may be reasonably required by SUNGROUP and at the cost of
SUNGROUP, to ensure Item 17 is transferred to SUNGROUP.
vii) SUNGROUP shall make all the payments within one week from today. The
Official Liquidator and WINSOME shall issue necessary NOCs./request letters
within one week thereafter.
viii) SUNGROUP shall pay ex gratia a sum of Rs.50 lakhs to the Employees'
Union, by a demand draft made out in the name of the Union, for equal
distribution to the employees who were in the employ of PUNWIRE during June,
1999 (when employees were last paid salaries by the company). In respect of any
employees who died subsequently, their LRs. shall be paid the employee's share.
The entire distribution shall be done by the Employees Union independent of
these proceedings.
ix) SUNGROUP will have the option to purchase Items 19 and 20 separately by
paying the price of Rs.4.50 lakhs and Rs.15.50 lakhs respectively to the
Official Liquidator to the account of PUNWIRE.
x) On the sale of Item No.17 being set aside and leasehold in respect of Plot
No.B-77, being transferred in favour of SUNGROUP, it is open to WINSOME to seek
refund of the transfer fee in regard to lease in its favour from PSIEC or stamp
duty from the State Government, if permissible, as per law.
The order of status quo granted on 5.12.2005 shall continue to be in force till
the transaction is completed, as aforesaid. Liberty is reserved to seek
clarifications, if necessary.