Supreme Court Exercises Article 142 to Protect Workmen’s Dues and Regulate Sale of Assets in Long-Pending Sick Industry Dispute

Held: The Supreme Court held that in long-pending industrial disputes involving sick companies and unpaid workmen dues, it is empowered under Article 142 of the Constitution to fashion comprehensive reliefs to secure justice, including regulating sale of assets, determining liability, and ensuring payment to workers. The Court emphasized that entities managing sick companies cannot deal with assets without authority and that protection of workmen’s dues is paramount, warranting judicial intervention to balance competing claims of stakeholders and prevent misuse of corporate control.

Summary: The case concerned a decades-old dispute arising from the closure and financial collapse of Jaipur Udyog Ltd., declared a sick company under SICA, with large-scale unpaid dues to workmen across its cement and jute units. A rehabilitation scheme initially approved by BIFR failed, leading to a recommendation for winding up, while GDCL, which had assumed management under the scheme, continued to deal with company assets and enter into settlements with workmen. The proceedings became complex due to overlapping litigation before BIFR, AAIFR, High Courts, and the Supreme Court, alongside repeal of SICA and introduction of the IBC. The Court examined the legality of GDCL’s actions, including sale of assets without permission, alteration of shareholding in subsidiary entities, and partial settlements with workers funded largely from asset sales. It also considered competing rehabilitation proposals from third-party investors and the reports of court-appointed mediators quantifying workers’ dues, which had remained unpaid for decades. The Court highlighted the prolonged deprivation suffered by workers, the irregular conduct in asset transactions, and the need to bring finality to the dispute while safeguarding legitimate claims.

Decision: The Supreme Court issued comprehensive directions under Article 142 to ensure payment of workmen’s dues, regulate and scrutinize past and future sale of assets of the company and its subsidiaries, consider viable schemes for resolution, and appoint appropriate mechanisms including a Court Administrator for implementation, while continuing supervisory jurisdiction to monitor compliance and disposing of connected applications.