Kolkata: The Calcutta High Court has ruled that once a company’s revival plan is approved by the Board for Industrial and Financial Reconstruction (BIFR), it takes precedence over any earlier agreements or settlements with employees that contradict it.
The ruling came in a case involving Titagarh Industries Limited and 35 former workers of the erstwhile Titagarh Paper Mills, in which the company had challenged a May 31, 2011, order of the First Labour Court. The Labour Court had directed Titagarh Industries to pay retrenchment and other dues to the workers, relying on a memorandum of settlement signed on October 21, 1981.
The workers had approached the Labour Court under Section 33C(2) of the Industrial Disputes Act, claiming unpaid benefits such as notice pay, leave travel allowance, medical aid, leave wages, bonus and retirement benefits.
The bench of Justice Shampa Dutt (Paul), while allowing the company’s plea, observed that “the memorandum of settlement dated 21.10.1981 will not prevail over the scheme of the BIFR dated 17.11.1994.”
The court said that once a rehabilitation scheme is sanctioned under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), it acquires statutory force and overrides any inconsistent agreement or instrument.
The BIFR had sanctioned a revival plan in November 1994 to rehabilitate Titagarh Paper Mills, which had been declared a sick industrial unit. Under the plan, its assets and certain liabilities were transferred to Titagarh Industries. The court noted that this BIFR scheme was a binding statutory document that crystallised the rights and liabilities of both the transferee company and the employees. Justice Dutt also pointed out that Section 32 of SICA gives the Act an overriding effect, meaning the scheme operates “notwithstanding anything inconsistent contained in any other instrument or agreement.”
Setting aside the Labour Court’s order, the High Court ruled that any dues payable under the BIFR plan could be raised before the competent authority for adjudication and speedy disposal.