STATE OF U.P. AND. ANR.versusUPTRON EMPLOYEES UNION CMD-I AND ORS.

                   STATE OF U.P. AND.ANR.                                        A
                             v.
           UPTRON EMPLOYEES' UNION CMD-I AND ORS.

                              APRIL 26, 2006

                [B.P. SINGH AND AL TAMAS KABIR, JJ.]                             B


      Company Law:

      Sick Industrial Companies (Special Provisions) Act, 1985 (SICA): Section
15.                                                                              c
      Sick industry-Payment ofsalaries and wages to workmen of a company
declared sick under S. I 5-Jurisdiction of Board of Industrial and Financial
Reconstruction (BJFR) in respect of-Held: Jn respect of a sick industrial
company, there is no legal obligation cast upon the State Government to pay      D
the wages due to its workmen-There is nothing in SICA which authorizes the
BIFR to pass an interim order directing the State Government in such
circumstances to pay the wages due to the employees of the sick industrial
company.

      The respondent-Company was declared a sick industry under Section          E
15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
The Board of Industrial and Financial Reconstruction (BIFR) passed an
interim order directing the appellant-State to make arrangements for
payment of salaries/wages to the workers of the respondent-Company on
humanitarian grounds till the proposed package of revival/rehabilitation
of the respondent-Company was finalized by the BIFR. The appellant filed         F
an appeal before the Appellate authority under SICA challenging the
direction for payment of salaries/wages to the workers of the respondent-
Company, which was dismissed. The High Court also dismissed the writ
petition filed by the appellant. Hence the appeal.
                                                                                 G
      On behalf of the appellant, it was contended that the BIFR had no
jurisdiction in a proceeding under SICA to make a direction to the State
Government to pay the wages due to the workers of a sick company.

      Allowing the appeal, the Court
                                    377                                          H
    378                     SUPREME COURT REPORTS (2006] SUPP. I S.C.R.

A         HELD: In respect of a sick industrial company, even if it be a
    subsidiary of a Government company, there is no legal obligation cast upon
    the State Government to pay the wages due to the workmen. The rights
    of the workmen are governed by the relevant provisions of the Companies
    Act, I 956 where their claim has been accorded priority. Moreover, there
B   is nothing in the Sick Industrial Companies (Special Provisions) Act, 1985
    which authorizes the Board of Industrial and Financial Reconstruction to
    pass an interim order directing the State Government in such
    circumstances to pay the wages due to the employees of the sick industrial
    company. 1387-G; 388-A-BI

C         A.K. Bindal v. Union of India, 1200315 SCC 163, Officer & Supervisors
    of l.D.P.l. v. Chairman & MD., l.D.P.L., 120031 6 SCC 490 and Heavy
    Engineering Mazdoor Union v. State of Bihar, (196911 SCC 765, relied on.

          Workmen of Rohtas Industries v. Rohtas Industries, 119951Supp.4 SCC
    5 and Kapi/a Hingorani v. State of Bihar, (20031 6 SCC 1, held inapplicable.
D
          CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6217 of 1999.

          From the Interim Order dated 23.12.1998 of the High Court of Judicature
    at Allahabad in C.M.A. No. 7329 (W) of 1998 in W.P. No. 4041 (MB) of
    1998.
E
                                       WITH

          C.A. Nos. 6171-6172 of 1999, and C.A. No. 6176 of 1999.

         Dinesh Dwivedi Abhishek Choudhary and Kavita Wadia for the
F   Appellants.

         Prateek Jalan, Malvika Trivedi T. Mahipal, A.K. Raina for R.D.
    Upadhyay, Vikram Dholakia, Niel Hilduth, Shiraz C. Patodia, Sanjay Kapur,
    Shubra Kapur, Rajiv Kapur, Miss Arti Singh, Meera Mathur, Mis. Manoj
G   Swarup & Co. (NP), S.K. Mehta, Sarla Chandra, M.T. George, Meenakshi
    Arora and Pradeep Misra for the Respondents.

          The Judgment of the Court was delivered by

          B.P. SINGH, J. The State of Uttar Pradesh is the appellant in these
H appeals Civil Appeal No. 6176/1999 has been preferred against the order of
      STATE OF U:P. v. UPTRON EMPLOYEES' UNION, CMD-1 [B.P. SINGH, J.]379·

    the Board .of Industrial and Financial Reconstruction (hereinafter referred to A
    as the '.'BIFR") dated 28.8.1998 whereby it directed. the State of Uttar Pradesh
    to. make on account payment to the workers towards their wages for ·the
    period June, L998 on wards on humanitarian grounds. Civil Appeal Nos.
    6171-6172/1999 has been preferred against the order of the High Court of
    Delhi whereby the writ petition preferred by the State of Uttar. Pradesh against .
    the order of BIFR dated. 27.8.1997, as affirmed by the Appellate Authority
                                                                                       B
    vide its order dated 6.5.1998, was rejected. Cixil Appeal No, 621711999 has
    been preferred against the interim order of the High Court of Judicature at
    Allahabad, Bench at Lucknow dated 23.12.1998 directing the State of Uttar.
    Pradesh to pay salary to the workers of Mis. UPTRON, as directed by the
    BIFR till the State Government takes final decision in the matter .relating to C
    revival/rehabilitation proposal made by it.

           A few facts which are relevant may be noticed at the threshold. Mis.
     UPTRON is a company incorporated under the Companies Act, 1956 and is
     a subsidiary of U.P. Electronics Corporation, a company wholly owned and
     controlled by the State of Uttar Pradesh. UPTRON became a sick industry         D
     since its net worth became negative and, therefore, a Reference was made
     under Section 15 of The Sick Industrial Companies (Special Provisions) Act,
     1985 (hereinafter referred to as "SICA"). The Reference was made on
    22. LI 994 and M/s. UPTRON was declared a sick industry on I 9.8.1994. The
     Industry Finance Corporation of India (IFCI) was appointed. the Operating       E
    Agency. It appears from the record that advertisements were issued in normal
    course inviting proposals for take over and/or revival of the sick unit. From
    the Order of the BIFR dated 27 .8. I 997 it appears that advertisement was
    issued pursuant to its order dated 29.1.1997 but no viable acceptable offer
    was received. The Coinpany had proposed a one time settlement whereby it
    offered to pay off I 00% of the principal amount and only 25% of the interest    F:
    due. However, for whatever reasons this proposal made no progress in the
    absence of a confirmation by the State Government. Mis. UPTRON India
    Ltd. stated that it had made a fresh proposal which had been submitted to the
    Government and that the Government was likely to consider it on 1.9.1997.
    In these circumstances, the BIFR considered the matter and passed certain
                                                                                     Q.
    directions by its order of 27.8.1997. It directed the Operating Agency to

-   make an indepth study of the proposal submitted by Mis. UPTRON to the
    State Govt, of Uttar Pradesh and to make its suggestions. It was directed tO
    submit its report within l 0 weeks after holding a joint meeting with the
    concerned parties. It also directed the Managing Director of Mis. UPTRON
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    380                    SUPREME COURT REPORTS [2006) SUPP. I S.C.R.

A to discuss the matter further the concerned banks with a view to obtain their
    consent as to the minimum acceptable quantum of one time settlement and
    quantum of sacrifices in terms of waiver of interest. Mis. UPTRON was also
    directed to have discussions with the Chief Secretary of the Govt. of Uttar
    Pradesh in regard to the quantum of funds proposed to be inducted by the
B   Govt. of Uttar Pradesh for revival/rehabilitation of M/s. UPTRON. The last
    direction made by the BIFR was in the nature of a direction to the Govt. of
    Uttar Pradesh to make arrangements for payment of salaries/wages of the
    workers till the proposed package of revival/rehabilitation of Mis. UPTRON
    was finalised by the BIFR. This last direction for payment of salaries/wages
    to the workers of M/s. UPTRON was challenged by the U.P. Electronics
C   Corporation before the Appellate authority under SICA which was dismissed.
    Thereafter, the State of Uttar Pradesh filed a writ petition before the High
    Court of Delhi which was dismissed by order dated 9.9.1998. As noticed
    earlier, C.A. Nos. 6171-6172/1999 have been preferred against the aforesaid
    order of the High Court of Delhi.

D         From the order of the BIFR dated 28.8.1998 it would appear that there
    was a proposal submitted by the State of U.P. for the revival of Mis. UPTRON.
    The Operating Agency was directed to examine the proposal and hold a joint
    meeting and submit its report by 17.7.1998. lt also appears that the Operating
    Agency prepared a background note to be considered in the joint meeting
E   wherein it was estimated that a sum of Rs. 171.04 crores was required for the
    revival of the sick industrial unit. The fund was to be provided by the Govt.
    of Uttar Pradesh. The joint meeting considered the proposals of the Govt. of
    Uttar Pradesh in the light of the background note prepared by the Operating
    Agency and though no final decision was taken, the financial institutions and
    the banks took time to consider the matter particularly by reference to the
F   working capital loans after receiving the concrete proposal from Mis.
    UPTRON. Ultimately, the State Bank of India on behalf of the consortium of
    banks did not respond and it appears that no further development took place.
    The Operating Agency also found the proposal received from the State
    Government to be sketchy and not providing any details relating to the
G   assumptions underlying the projections.

          It appears from the said order that the Special Secretary of the Govt.
    of Uttar Pradesh submitted before the BIFR that the revival package for the
    company has been discussed with the Chief Secretary and thereafter the
    Chief Minister. Although the same had been approved in principle by the
H
  STATE OF U.P. v. UPTRON EMPLOYEES' UNION, CMD-I [B.P. SINGH, J.]381

Chief Minister, the matter had been sent to the Prime Minister's office who       A
sought commitment from the State Government about its contribution. Some
time was prayed for to enable the Government to take a decision in the matter
and to convey its views. The order of the BIFR also notes the fact that the
State Government had given a sum of Rs. 6.98 crores in addition to Rs. 2
crores for payment of salaries by way of loan carrying interest @ 22% per         B
annum. The workers had received their wages for the period November, 1997
to May, 1998 but no payment had been made for the period subsequent
thereto. The order of the BIFR thereafter directed the State Government to
make on account payment to the workers towards their wages after May,
1998. This order of the BIFR is challenged before us in C.A. No. 617611999.

       In the same order the BIFR noted that the case had been before the
                                                                                  c
Board since August, 1994 and no rehabilitation scheme could be finalised
primarily on account of the State Government not being able to take a decision
regarding infusion of funds for rehabilitation of the company. It, therefore,
directed the Government of Uttar Pradesh to convey their decision positively
within eight weeks to the Operating Agency and the BIFR whether it could          D
induct Rs. 171.04 crores as envisaged in the scheme submitted by the
Government of Uttar Pradesh for the revival of Mis. UPTRON. The Board
also indicated that in case the State Government was not agreeable to provide
the amount as aforesaid, the Bench may pass further appropriate orders which
may include issue of show cause notice for winding up of the company              E
without holding any further hearing. If the Govt. ofUttar Pradesh was willing
to provide the necessary funds the directions would be made acc9rdingly.
Some other directions were made which we do not consider necessary to
notice at this stage.

       While the position stood thus, the Mis. UPTRON Employees Union -           F
respondent No. I herein and two other associations of the workers and officers
of Mis. UPTRON filed a writ petition before the High Court of Judicature at
Allahabad, Lucknow wherein it was stated that the Cabinet of Uttar Pradesh
had taken a decision of closure of Mis. UPTRON on 1.12.1998 as appeared
from the press reports. The press report showed that Mis. UPTRON had
incurred a loss to the tune of Rs. 330 crores which was not the correct figure.   G
Having regard to the fact that financial institutions were willing to waive a
part of the liability, the loss if any was only Rs.93 crores. Reliance was
placed on a photocopy of news item published on 2.12.1998 in the Hindustan
Times a local daily. In the writ petition it was prayed that a writ of mandamus
be issued restraining the Govt. ofU.P. from implementing the Cabinet decision     H
    382                     SUPREME COURT REPORTS [20061 SUPP. I S.C.R.

A of December 01, 1998. It was also prayed that a writ of mandamus be· issued
    restraining the opposite parties from closing the Company without waiting
    for the decision of BIFR. It was also prayed that a suitable direction be issued
      I
    to the opposite party to honour the order of BIFR dated 27.8.1997 for payment
    of salary to the employees of M/s.UPTRON. It is not necessary to notice the
B   other prayers in the writ petition. In this writ petition an interim order was
    passed by the High Court on 23.12.1998. From a perusal of the order of the
    High Court it appears that the Additional Advocate General for the State
    objected to the maintainability of the writ petition inasmuch as the matter
    was pending before the BJFR. He also informed the Court that the State
    Government had not passed any order regarding closure of Mis. UPTRON.
C   This was controverted by the writ petitioners who asserted that such a decision
    had been taken by the Cabinet and in fact the Principal Secretary (Electronics)
    of the State of U.P. had passed an order on 9.12.1998 for the rehabilitation
    of the workers. The High Court noticed the submission urged on behalf of
    the State Government that it had not yet taken a final decision to close
    Mis. UPTRON and the matter was being considered by the BIFR, and the
D   State Government had been asked to indicate as to whether it was in a
    financial position to revive the unit. The High Court passed an interim order
    in view of the aforesaid circumstances directing the State Government to pay
    salary to the workers pursuant to the order passed by the BIFR till the State
    Government took a final decision in that regard. C.A. Nos. 6216-6217/1999
E   have been preferred against the said interim order of the High Court of
    Judicature at Allahabad, Lucknow Bench, Lucknow.

          In all the appeals before us the submission urged on behalf of the State
    of Uttar Pradesh is that the BIFR had no jurisdiction in a proceeding under
    SICA to make a direction to the State Government to pay the wages due to
F   the workers of a sick company. It has also been the stand of State of Uttar
    Pradesh that Mis. UPTRON India Ltd. is a subsidiary of U.P. Electronics
    Corporation Limited, which is a company wholly owned and controlled by
    the State of Uttar Pradesh. In any event, it was submitted that there was no
    provision in the SICA which authorises the BIFR to pass an order directing
G   the State of Uttar Pradesh to pay the salaries/wages of the employees of a
    sick company in regard to which an inquiry is pending before the BIFR.

          One fact which may be noticed is that the Government of Uttar Pradesh
    has since informed the BIFR by its letter of 12. 1.1999 that it is not willing
    to induct any further funds for the revival/rehabilitation of Mis. UPTRON. It
H   is suggested that in the circumstances the BJFR may, if so advised, wind up
        STATEOFU.P. v. UPTRON EMPLOYEES' UNION, CMD-1 [B.P. SINGH, J.]383

      Mis. UPTRON since the State Government is not in a position.to provide the       A
      requisite funds for its revival.

               In view of the submissions urged before us it is necessary to notic.e ,the
        relevant provisions of the SICA. There is no dispute about the.fact that
        Mis. UPTRON is a sick company within the meaning of that term in SICA.
        A "sick industrial company" has been defined under Section 3(0) of the Act 'B
      ·to mean, an industrial company (being a company registered for not less than
        five years) which has at the end of any financial year accumulated .losses
        equal to or exceeding its entire net worth. There is no dispute that the net
        worth of Mis. UPTRON is negative. Under Section 15 of SICA if any industrial
       company has become sick an obligation is cast upon its Board of Oirectors C
       to make a Reference to the BIFR for determination .of the measures which
     ·shall be.adopted. with respect to the cbmpany. This has to be done in the
       manner and within the period prescribed by Section 15. on receiving such·a
       Reference, the BIFR is required by. Section 16 of the Act to make .such
        inquiry as it may deem fit for determining whether any industrial company
       has become a sick industrial company. If after making inquiry under Section · D
        16, the BIFR ·is satisfied that the company has become· a sick ·industrial
       company; it is required to decide as soon as may be by order in .writing
       Whether it is practicable for the company to make its network exceed the
       accumulated losses within a reasonable time. This is provided in Section 17
.-     of SICA. Sub-section (2) of Section 17 is applicable if it is found practicable · E
       for a sick industrial company to make its net worth exceed the accumulated
     ·losses within a reasonable time. In such a situation the BIFR may give .to
       such a company directions so as to ·enable· it to make its network exceed the
       accumulated losses. However, if that is not possible, the BIFR must proceed
       under sub-section (3) of Section 17. If the Board comes to the conclusion that
       it is. necessary or expedient in the public interest to adopf all or any of the F
       measures specified in Section 18 in relation to the Said compariy, it may as
       soon as may be, by order in writing, direct the operating agency specified In
     ·the order to prepare a scheme providing for such measures in relation to the
      company. Under Section 18 the Operating Agency is required to prepare
      such·a scheme with respect to·such a company providing for any one or more G
      of the measures enumerated in sub-clauses (a) to ( f) of sub-section (I) of
      Section 18. The scheme prepared by the Operating Agency is then examined
      by the BIFR and necessary steps taken in accordance with th"e remaining
     ·provisions of Section 18. Section 19' cleats with Schemes wh"ich relate to
                                                                              to
      preventive, ameliorative, remedial and other measures· with respect .·any . H
•
    384                     SUPREME COURT REPORTS [2006) SUPP. I S.C.R.

A sick industrial company. In such a scheme provision is made for financial
    assistance by way of loans, advances or guarantees or reliefs or concessions
    or sacrifices from the Central Government, a State Government, any scheduled
    bank or other bank, a public financial institution or State level institution or
    any institution or other authority etc.

B          Section 20 of the Act mandates that where the BIFR after making
    inquiry under Section 16 after consideration of the relevant facts and
    circumstances, and after giving an opportunity of being heard to all the
    parties, is of the view that the sick industrial company is not likely to make
    its net worth exceed the accumulated losses within a reasonable time while
C   meeting all its financial obligations, and that the company as a result thereof
    is not likely to become viable in future, and that it is just and equitable that
    the company should be wound up, shall forward its opinion to the concerned
    High Court, which on the basis of the opinion of the Board, may order
    winding up of the sick industrial company in accordance with the provisions
D   of the Companies Act.

           None of the provisions noticed above provide that while considering a
    scheme for revival, the BIFR has authority to direct payment of wages to the
    workers of the sick industrial company. It is quite apparent that though the
    matter has remained under consideration of the BIFR since the year 1994 nu
E   viable acceptable proposal has so far been received. At one time the State of
    Uttar Pradesh had shown some interest in reviving the sick unit but now by
    its letter dated 12.1.1999 it has made its position clear that it is not in a
    position to mduct the necessary funds. In fact, it had suggested that the unit
    may be wound up.

F        Learned counsel appearing on behalf of the State of Uttar Pradesh has
  referred to the decisions of this Court in the case of A. K. Bindal and Anr. v.
  Union vf India and Ors., (2003] 5 SCC, 163 and Officer & Supervisors of
  J.D.P.L. V. Chairman & M.D., /.D.P.l. and Ors.. [2003] 6 sec, 490 and
  submitted that in similar circumstan~es this Coun held in A. K. Binda/'s case
G (supra) that if a sick industrial company sustaining losses continuously over
  a period, failed to pay salaries and dues to its employees, the workmen and
  employees cannot claim any lt:gal right to ask for a direction to the Central
  Government to meet the additional expenditure which may be incurred on
  account of revision of pay scales. We notice that the aforesaid decision was
  rendered in a case where the company concerned had been declared to be a
H sick industrial company under SICA and the matter was under consideration
  STATE OF U.P. v. UPTRON EMPLOYEES' UNION CMD-1 [B.P. SINGH, J.]385

of the BIFR. This Court observed:                                                    A
        "17. The legal position is that identity of the government company
        remains distinct from the Government. The government company is
        not identified with the Union but has been placed under a special
         system of control and conferred certain privileges by virtue of the
        provisions contained in Sections 619 and 620 of the Companies Act.           B
        Merely because the entire shareholding is owned by the Central
        Government will not make the incorporated company as Central
        Government. It is also equally well settled that the employees of the
        government are not civil servants and so are not entitled to the
        protection afforded by Article 311 of the Constitution (Pyare Lal            C
        Sharma v. Managing Director). Since employees of government
        companies are not government servants, they have absolutely no legal
        right to claim that the Government should pay their salary or that the
        additional expenditure incurred on account of revision of their pay
        scale should be met by the Government. Being employees of the
        companies it is the responsibility of the companies to pay them salary       D
        and if the company is sustaining losses continuously over a period
        and does not have the financial capacity to revise or enhance the pay
        scale, the petitioners cannot claim any legal right to ask for a direction
        to the Central Government to meet the additional expenditure which
        may be incurred on account of revision of pay scales."                       E
      This Court specifically held that the economic viability or the financial
capacity of the employer is an important factor which cannot be ignored
while fixing the wage structure, otherwise the unit itself may not be able to
function and may have to close down which will inevitably have disastrous
consequences for the employees themselves.                                           F

      The same legal position has been reiterated by this Court in the case of
Officer & Supervisors of I.D.P.L. v. Chairman & M.D., l.D.P.L. and Ors.
(supra), this Court observed in paras 7 and 8 as under:-

        "7. In the above background, the question which arises for                   G
        consideration is whether the employees of public sector enterprises
        have any legal right to claim revision of wages that though the
        industrial undertakings or the companies in which they are working
      · did not have the financial capacity to grant revision in pay scale, yet
        the Government should give financial support to meet the additional          H
    386                    SUPREME COURT REPORTS (20061 SUPP. 1 S.C.R.

A          expenditure incurred in that regard.

           8. We have carefully gone through the pleadings, the annexures filed
           by both sides and the orders passed by the BIFR and the judgments
           cited by the counsel appearing on either side. Learned counsel for the
           contesting respondent drew our attention to a recent judgment of this
B          Court in A.K. Bindal v. Union of India in support of her contention.
           We have perused the said judgment. In our opinion, since the
           employees of government companies are not government servants,
           they have absolutely no legal right to claim that the Government
           should pay their salary or that the additional expenditure incurred on
c          account of revision of their pay scales should met by the Government.
           Being employees of the companies, it is the responsibility of the
           companies to pay them salary and if the company is sustaining losses
           continuously over a period and does not have financial capacity to
           revise or enhance the pay scale, the petitioners, in our view, cannot
           claim any legal right to ask for a direction to the Central Government
D          to meet the additional expenditure which may be incurred on account
           of revision of pay scales. We are unable to countenance the submission
           made by Mr. Sanghi that economic viability of the industrial unit or
           the financial capacity of the employer cannot be taken into
           consideration in the matterofrevision of pay scales of the employees."
E        We may observe that in both cases the earlier decision of this Court in
    Heavy Engineering Mazdoor Union v. State of Bihar and Ors., [1969) I
    sec, 765 was noticed and applied.
        Counsel for the respondents have placed reliance on Workmen of Rohtas
F industries v. Rohtas industries and Ors., [ 1995) Supp 4 SCC, 5. In that case
  this Court passed an order directing the State Government and the Central
  Government to contribute a sum Rs. 30 crores each with a view to work the
  industry which has closed down, having regard to its potential. However, as
  noticed by the Court, the experiment did not yield any result and this Court
  noted that the uprecedented course adopted by this Court of assuming direct
G control over the functioning of the undertaking with a view to secure its
  revival and rehabilitation had failed, and it was therefore constrained to put
  an end to the proceedings and permit resumption of the winding up proceedings
  before the High Court. It would, thus, appear that the order passed in the
  matter of Rohtas Industries (supra) was passed in the peculiar facts of the
H case and no principle had been laid down that in such a case it is the duty
  STATE OF U.P. v. UPTRON EMPLOYEES' UNION, CMD-1 [B.P. SINGH, J.]387

 or obligation of the State Government or the Central Government to· provide          A
 funds for payment of dues of workers. Reliance was also placed on the
decision of this Court in the case of Kapila Hingorani v. State of Bihar,
 [2003] 6 SCC, I. The order passed therein was passed in the peculiar facts
and circumstances, where a large number of.employees employed in a large
 number of government corporations and undertakings were not paid their
dues for years together. Invoking the principle enshrined in Articles 21 and          B
 23 of the Constitution, this Court directed the State of Bihar to deposit a sum
of Rs. 50 crores before the High Court for disabursement of the salaries to
the employees of the corporations. It also vested a discretion in the High
Court to direct disabursement of some funds to the needy employees on
adhoc basis so as to enable them to sustain themselves for the time being.            C
There was also a clear direction that the rights of the workmen shall be
considered in terms of Section 529A of the Companies Act. There are
observations in the judgment of this Court to the effect that the Government/
public sector undertakings being "State" would be constitutionally liable to
respect life and liberty of all persons in terms of Article 21 of the Constitution.
They therefore, must do so in cases of their own employees. The Government            D
of the State ofBihar for all intent and purport is the sole shareholder. Although
in law, its liability towards the debtors of the company may be confined to
the shares held by it, but having regard to the deep and pervasive control it
exercises over the government companies in the matter of enforcement of
hurrian right and/or rights of the citizen to life and liberty, the State has also    E
an additional duty to see that the rights of the e~ployees of such corporations
are not infringed. Having said so, the Court in para 74 of the judgment said,

        "74. We, however, hasten to add that we do not intend to lay down
        a law, as at present advised, that the State is directly or vicariously
        liable to pay salaries/remunerations of the employees of the public           F
        sector undertakings or the government companies in all situations,
        We, as explained hereinbefore, only say that the State cannot escape
       'its liability when a human rights problem of.such magnitude involving
        the starvation deaths and/or suicide by the employees has taken place
        by reason of non-payment of salary to the employees of public sector          G
        undertakings for such a long time."

      It would, thus, appear that this Court did not lay down any principle of
law of universal application and passed appropriate orders only in. the
compelling circumstances noticed by it. We are, therefore, satisfied that in
respect of a sick industrial company, even if it be a subsidiary of a government      H
    388                     SUPREME COURT REPORTS [2006] SUPP. I S.C.R.

A company, there is no legal obligation cast upon the State Government to pay
    the wages due to the workmen. The rights of workmen are governed by the
    relevant provisions of the Companies Act where their claim has been accorded
    priority. Moreover, in any view of the matter we find nothing in SICA which
    authorises the BIFR to pass an interim order directing the State Government
    in such circumstances to pay the wages due to the employees of the sick
B   industrial company. We, tht:rcfore, allow all these appeals and set aside the
    impugnt:d orders.

          These appeals are, accordingly allowed with no order as to costs.

C        Before parting with this case, we must notice that the proceedings
  under SICA in the instant case are pending before the BIFR since August,
  1994. We are told that in view of the pendency of the appeals before this
  Court the BIFR as well as the High Court did not proceed further in the
  matters. This is rather unfonunate, because in the absence of any order of
  stay passed by this Court in these proceedings, the High Court as well as the
D BIFR should have proceeded with the matters before them and concluded the
  proceedings. It is most unfortunate that a sick industrial company which
  needs immediate attention and treatment has to wait for 12 years with no
  result in sight. The BIFR must be conscious of the fact that in the sick
  industrial companies the liabilities accummulate as time passes and, therefore,
E the conditioi1 of the sick unit becomes worse day after day. If a proceeding
  before the BIFR is not concluded within a reasonable time, it becomes counter
  productive because rather than reviving the sick industrial unit it makes it
  mon: sick and, therefore, it becomes even more difficult to revive such an
  und.:rtaking. One can well imagine what may be the dues now payable to the
  workmen and employees of the sick industrial company in this case. If no
F one was willing to submit a viable proposal in the year 1994, it will be even
  more difficult today to secure a proposal for the revival of the company. The
  pendency of the proceedings before the BIFR for almost 12 years has made
  the situation worse. The network of the sick unit was negative to begin with
  and dS of date the dues to the workmen and the intcre~t etc., payable tu other
U cn.:diturs may have to be added to the liabilities of the company. We only
  wish to impn:ss upon the BIFR that proceedings under SICA must not be
  kept pending for so long and having regard to the fact that every day's delay
  adversely affects the financial condition of the undertaking a final decision
  one way or the other must be taken within a reasonable time. We also cannot
  lose sight of the fact that the protective provisions of SICA places the creditors
H of the sick industrial company in a rather precarious position, since they are
  STATE OF U.P. v. UPTRON EMPLOYEES' UNION CMD-1 [B.P. SINGH, J.]J89

not able to realize their dues from the sick industrial company in view of the   A
provision of Section 22 of SICA. It is only desirable that the formulation of
the scheme and its execution must be done within a reasonable time.

      We do hope and trust that the BIFR will now take up the matter and
dispose of the proceedings within a short period, say, within a period of six
months from the date of receipt of a copy of this order or its production by     B
any of the parties before it. Similarly, the writ petition pending in the High
Court should also be disposed of as early as possible and preferably within
a period of six months from today.

v.s.s.                                                       Appeal allowed.