Supreme Court Orders Payment of Pending Salaries to Sugar Factory Workers in Liquidation Case

The Supreme Court of India has ruled in favor of the employees of a sugar factory in liquidation, directing the Maharashtra State Co-operative Bank Ltd. to disburse pending salary and wage dues. The judgment ensures that workers receive their rightful dues from the funds deposited in court, while also clarifying the responsibilities of the bank and the authorities involved in the case.

Background of the Case

The case involved a long-standing dispute over unpaid salaries and statutory dues of employees of a sugar factory that had gone into liquidation. The Maharashtra State Co-operative Bank Ltd. had initially deposited Rs. 3.52 crores with the Supreme Court following an earlier order. The total amount, including accrued interest, had grown to Rs. 4.95 crores. Additionally, the bank had deposited Rs. 13.89 crores with the Industrial Court, Bhandara.

Following previous orders, the bank sought permission to withdraw any excess amount beyond what was due to the employees. The employees, however, demanded that their dues be paid in full, including salaries, wages, and statutory benefits like provident fund and gratuity.

Arguments by the Petitioner (Maharashtra State Co-operative Bank Ltd.)

The bank argued that it had complied with previous court orders and had deposited Rs. 3.52 crores in court and Rs. 13.89 crores with the Industrial Court.
It contended that the employees’ salary and wage dues should be paid from the deposited amount, but the statutory dues such as provident fund, gratuity, and bonuses were the responsibility of the new purchaser of the sugar factory.
The bank requested permission to withdraw any excess funds remaining after employee salaries were paid.

Arguments by the Respondents (Employees of the Sugar Factory)

The employees argued that they had been waiting for their dues for a long time and that the full amount of Rs. 4.95 crores and Rs. 13.89 crores should be used to clear their pending wages.
They demanded that all payments, including statutory dues, be cleared before any amount was refunded to the bank.
They requested that the disbursement process be carried out under the supervision of the Collector, Bhandara, to ensure transparency.

Supreme Court’s Observations and Ruling

The Supreme Court considered the arguments and ruled that the deposited funds should be used to pay the employees’ salaries and wages. The Court also held that statutory dues, such as provident fund and gratuity, were the responsibility of the new purchaser of the sugar factory, as per prior agreements.

The key directives from the judgment include:

The Rs. 3.52 crores deposited by the bank, along with accrued interest, must be transferred to the account of the Collector, Bhandara, for disbursement to employees.
The Rs. 13.89 crores lying with the Industrial Court, Bhandara, along with interest, must also be transferred to the Collector’s account.
The Collector, Bhandara, must ensure that the dues are paid directly to employees’ bank accounts after proper verification and identification.
All payments must be completed by December 31, 2023.
Any balance amount remaining after disbursing salaries must be returned to the Maharashtra State Co-operative Bank Ltd.

The Court emphasized:

“The amount due and payable towards the wages/salaries of the concerned employees of the sugar factory in liquidation shall have to be paid to them and/or their legal heirs (in case of deceased employees) out of the aforesaid amount.”

Final Judgment

The Supreme Court ordered:

The full amount of Rs. 3.52 crores, plus interest, should be transferred to the Collector for immediate disbursement.
The Rs. 13.89 crores, plus interest, should also be transferred to the Collector for salary payments.
The Collector must ensure transparent and accurate payments to employees and their legal heirs.
Statutory dues must be handled by the purchaser of the sugar factory.
Any surplus funds after payments are made should be returned to the bank.

Implications of the Judgment

This ruling has several critical implications:

Employee Rights: Reinforces the right of employees to receive pending salaries and wages, even after their employer has gone into liquidation.
Accountability of Employers: Clarifies that statutory dues like provident fund and gratuity are the responsibility of the new purchaser.
Judicial Oversight in Liquidation Cases: Ensures that funds meant for employees are not misappropriated and that proper verification is conducted before disbursement.
Role of the Collector: Strengthens the role of district authorities in overseeing payments and ensuring transparency.

Conclusion

The Supreme Court’s ruling in The Maharashtra State Co-operative Bank Ltd. vs. Babulal Lade & Others ensures that employees of a defunct sugar factory receive their rightful dues. By directing the Collector to handle the disbursement, the Court has established a transparent process that protects the interests of workers. The decision also clarifies the responsibility of employers and subsequent purchasers in liquidation cases, setting a precedent for future labor disputes involving financially troubled businesses.

Petitioner Name: The Maharashtra State Co-operative Bank Ltd..
Respondent Name: Babulal Lade & Others.
Judgment By: Justice M.R. Shah, Justice Krishna Murari.
Place Of Incident: Maharashtra.
Judgment Date: 23-03-2023.

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