JUDGMENT

K.C. Sood, J.

1. The question raised in this writ petition under Article 226 of the Constitution of India is:

Whether the petitioner HPSIDC having taken over the hypothecated assets of a loanee Company under Section 29 of the State Financial Corporation Act, and then handing over back such assets to the same loanee Company after one time settlement, can be termed as successor or assign of the loanee company within the meaning of Section 18(c) of the Industrial Disputes Act.

2. In order to appreciate the controversy, the facts relevant for the purpose of the disposal of this writ petition may be noticed.

3. The petitioner H.P. State Industrial Development Corporation, (HPSIDC for short), a Government Company incorporated under the Companies Act, 1956, and Himachal Pradesh Financial Corporation, (HPFC for short) respondent No. 8, advanced a loan of Rupees 32.2 lakhs and Rupees 30 lakhs respectively, to Unit Techno Cylinders (P) Ltd., ("First Company" for short). First Company defaulted in the payment of dues to the HPSIDC and HPFC. After protracted correspondence and notice, the hypothecated/ mortgaged assets of the First Company were taken over by the HPSIDC on February 24, 1995. Immediately thereafter, offers for the sale of assets of the First Company were invited by the HPSIDC. This action of the HPSIDC was challenged by the First Company by a Writ Petition No. (119 of 1995) in this Court. A Division Bench of this Court by orders dated August 29, 1995 (CWP No. 119 of 1995) took note of the fact that the unit of the First Company was taken over by the HPSIDC and consequent to the advertisement issued for inviting buyers for the purchase of this unit, two offers were received. The highest offer was of Rupees 48,00,000/-. The First Company brought a better buyer Fardays Engineering Private Limited. ("Second Company" for short). The Second Company offered Rupees 85,00,000/- for the entire unit with down payment of Rupees 25,00,000/- and the balance amount in six equal half yearly instalments. The Division Bench of this Court taking into consideration the interest of both the Government Corporations and with a view that public money is recovered at the earliest, directed:

"1. For all past liabilities, Fardays Engineering Private Limited etc. shall pay a sum of Rs. 1,01,00,000/- (One crore and one lac) in accordance with the following terms.

2. In addition to Rs. 8.50 lacs already paid, the said company shall pay Rs. 16.5 lacs within a period of one month.

3. Along with the amount, the bank guarantee from nationalized bank shall be furnished to both the Corporations and the said bank guarantee shall be for the balance amount of Rs. 76,00,000/-.

4. On the balance amount, the said company shall pay interest at the rate of 18.5% per annum with half-yearly rests.

5. The installment shall be at the rate of Rs. 10,00,000/- payable half-yearly and the first instalment shall be payable after six months rests from the handing over of the unit by the Corporation and the interest shall accrue from the date, unit is handed over to the above company.

6. The unit shall be handed over on the following day of the payment of Rs. 25,00,000/- and the bank guarantee from the nationalized bank as stated above. Out of Rs. 25,00,000/-, Rs. 8,50,000/- already paid shall be deducted.

7. Except in two defaults in payment, the Corporation shall be at liberty to invoke the bank guarantee for the entire amount.

8. We further direct that the keys of the unit shall be handed over to Shri Ashok Sharma Nabhewala, learned counsel for the petitioner and all properties lying in the unit shall be released to the above petitioner-company."

4. In compliance to the orders of the Court, Second Company paid Rs. 1,01,00,000/- for all past liabilities and unit was handed over back to the First Company through its counsel Shri Ashok Sharma Nabhewala advocate and all the properties in the unit were released to the First Company. The fact that the assets taken over by the HPSIDC were handed over back to the First Company on November 18, 1995 (Annexure-PE) is not in dispute.

5. On October 22, 1999, the Labour Commissioner, Himachal Pradesh issued a letter to the Managing Director of the HPSIDC saying that the workers of the First Company, assets of which were taken over by the HPSIDC, have preferred a claim amounting to Rs. 5,60,137/- on account of their dues payable by the First Company pursuant to the award made by the Labour Court and that now the workers have requested for Recovery Certificate under Section 33-C(1) of the Industrial Disputes Act, 1947. The Labour Commissioner also informed the HPSIDC that Fardays Engineering had paid Rupees 1,01,00,000/- in terms of the orders in Civil Writ Petition No. 119 of 1995 in respect of all pending liabilities and, therefore, the amount due to the workers is recoverable from the HPSIDC. The HPSIDC wrote back to the Labour Commissioner informing that one time settlement was reached with the First Company and the keys, pursuant to the one time settlement in terms of the orders of this Court in Civil Writ Petition No. 119 of 1995, were handed over to Mr. Ashok Sharma Nabhewala, counsel for the First Company and all properties lying at that unit were handed over back to the First Company. The First Company in the fact situation did not take over the assets and never made any sale of the assets of the First Company to the Second Company. It was also pleaded that only hypothecated assets of the First Company were taken over by the HPSIDC under Section 29 of the State Financial Corporations Act and management of the First Company was never transferred to the HPSIDC and for this reason too, the HPSIDC cannot be saddled with the liability to satisfy the award of the Labour Court.

6. The Labour Commissioner not satisfied issued certificate under Section 33-C(1) of the Industrial Disputes Act certifying that a sum of Rupees 5,06,137/- are payable to the workers affiliated to the Unit Techno Cylinders Workers Union by the Managing Director of the HPSIDC and said amount was directed to be realised as arrears of land revenue from the HPSIDC.

7. It is in this factual backdrop petitioner HPSIDC prays for the quashing of the recovery certificate Annexure-PJ issued by the respondent No. 2 and also setting aside and quashing of the recovery proceedings initiated by the respondent Nos. 1 to 4 against the HPSIDC on the basis of the recovery certificate Annexure-PJ.

8. The case of the HPSIDC is that the petitioner is not responsible to pay Rupees 5,06,137/- in terms of the award of the Labour Court on account of arrears towards the workmen of the First Company. The action of the respondents No. 1,3 and 4 to recover this amount from the HPSIDC is totally illegal, without jurisdiction and ultra vires of the provisions of the Industrial Disputes Act, 1947 inasmuch as the HPSIDC does not fall within the meaning of Employer or successor of the First Company under the provisions of the Industrial Disputes Act. The respondent No. 2, it is pleaded, has misinterpreted the orders of this Court in Civil Writ Petition No. 119 of 1995. The HPSIDC, it is contended, was a creditor of the First Company and such dues were paid by the Second Company in terms of the orders of the High Court and, therefore, the liability towards the workers in terms of the award of the Labour Court cannot be fastened on the HPSIDC.

9. The stand of the State and the Collector is that the recovery proceedings have been started against the HPSIDC in compliance to the recovery certificate after the case was referred to them by the respondent No. 2 Labour Commissioner of Himachal Pradesh.

10. The stand of the Labour Commissioner is that it was for all past liabilities that the second Company paid Rupees 101 lakhs to the HPSIDC and said past liability of the First Company includes the liability of the First Company to satisfy the award of the Labour Court.

11. Heard Mr. Ajay Kumar, learned counsel for the HPSIDC, Mr. Ashok Choudhary learned Additional Advocate General for respondents No. 1 to 4. Mr. Rahul Mahajan, advocate for respondent No. 7 Workers Union and Mr. Kuldip Singh learned senior advocate for HPFC.

12. As noticed earlier, it is admitted position that HPSIDC took over the assets of the First Company on February 24, 1995 and thereafter offers were invited for the sale of the assets of the First Company. This action of the HPSIDC was challenged by the First Company in this Court in Civil Writ Petition No. 119 of 1995. A Division Bench of this Court by order dated August 29, 1995 disposing of the writ petition, directed the payment of Rupees 101 lakhs by the Second Company towards the liability of the First Company for all past liabilities of the HPSIDC and HPFC. The Division Bench also directed the handing over of the unit, which was taken over by the HPSIDC, back to the First Company through its counsel Mr. Ashok Sharma Nabhewala. This unit was accordingly handed over to Mr. Ashok Sharma Nabhewala advocate, counsel for the First Company (Annexure-PE) on November 18, 1995.

13. Section 18 of the Industrial Disputes Act provides for the Persons on whom settlements and awards are binding. Sub-section (3)(c) stipulates that an award made by a Labour Court would be binding on an Employer including his heirs, successors or assigns in respect of the establishment to which the dispute relates. Section 18 may be reproduced for convenience:

"18. Persons on whom settlements and awards are binding:

(1) A settlement arrived at by agreement between the employer and workman otherwise than in the course of conciliation proceedings shall be binding on the parties to the agreement.

(2) Subject to the provisions of Sub-section (3), an arbitration award which has become enforceable shall be binding on the parties to the agreement who referred the dispute to arbitration.

(3) A settlement arrived at in the course of conciliation proceedings under this Act or an arbitration award in a case where a notification has been issued under Sub-section (4-A) of Section 19-A or an award of a Labour Court, Tribunal, or National Tribunal which has become enforceable shall be binding on-

(a) all parties to the industrial dispute;

(b) all other parties summoned to appear in the proceedings as parties to the dispute, unless the Board, arbitrator, Labour Court, Tribunal or National Tribunal, as the case may be records the opinion that they were so summoned without proper cause;

(c) where a party referred to in Clause (a) or Clause (b) is an employer, his heirs, successors, or assigns in respect of the establishment to which the dispute relates;

(d) where a party referred to in Clause (a) or Clause (b) is composed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part."

14. It may thus be seen that this award would be binding on the HPSIDC if it can be termed to be a successor of the First Company.

15. There is no dispute that assets of the First Company were taken over by the HPSIDC under Section 29 of the State Financial Corporation's Act and offers for sale of such assets were invited. This action of the HPSIDC was challenged before this Court and by a Court Order, on offer of payment of Rupees 101 lakhs by the Second Company for past liabilities of the First Company, the unit was handed over back to the First Company.

16. In this view of the factual matrix, in my view, HPSIDC cannot be said to be either successor or assign of the First Company. The reason is not far to seek. The action of the HPSIDC in taking over the assets was not approved by a Division Bench of this Court and those assets were handed over back to the First Company on payment of Rupees 101 lakhs towards all past liabilities of the HPSIDC and HPFC. It is so clear from the orders of the Division Bench. The Division Bench observed that the counsel for the HPSIDC accepted one time settlement if the amount was paid in one go, i.e. within a period of one month and the Court, considering the liability of the First Company towards HPSIDC and HPFC, settled payment of Rupees 101 lakhs for the past liabilities. The expression, "past liability" here in view of the averments in the Writ Petition (119 of 1995) was only towards the past liability of the First Company towards the HPSIDC and HPFC. The expression "past liability" cannot be stretched to the liabilities towards other creditors of the First Company or wages to the employees. In paragraph 8 of the directions, the Division Bench directed:

"We further direct that the keys of the unit shall be handed over to Shri Ashok Sharma Nabhewala, learned counsel for the petitioner and all properties lying in the unit shall be released to the above petitioner-company."

17. It thus is clear that the action of the HPSIDC in taking over of the assets of the First Company and steps towards its sale was set aside on the settlement of the dues towards the liability of the HPSIDC and HPFC and the assets were handed over back in terms of Direction No. 8 to the First Company. In other words, the action of the HPSIDC under Section 29 of the State Financial Corporation Act became non est and the assets of the First Company for all intent and purposes remained with the First Company. Such hypothecated assets were never transferred to the HPSIDC. HPSIDC, in this view of the matter cannot be said to be successor or assign of the First Company.

18. This apart, as far back in 1963, a Constitution Bench of the Supreme Court in Anakapalle Co-operative Agricultural and Industrial Society Ltd. v. Workmen and Ors., AIR 1963 SC 1489 : 1962-II-LLJ-621 interpreting the provisions of the Industrial Disputes Act held that the question whether a purchaser of an industrial concern can be held to be successor-in-interest of the vendor depends upon various relevant facts including:

(a) Did the purchaser purchase the whole of the business;

(b) Was the business purchased as on going concern at the time of the sale;

(c) Is the business purchased carried on at the same place as before without substantial break in time.

19. In this particular case, admittedly, apart from the fact that the action of the HPSIDC under Section 29 of the Act became non-est in view of the orders made by the Division Bench of this Court in Civil Writ Petition No. 119 of 1995, only hypothecated assets were taken over by the HPSIDC and not the on going concern, the First Company HPSIDC neither transacted any business of the First Company nor administered the Company.

The HPSIDC thus cannot be said to be a "successor company" of the First Company within the meaning of Section 18(c) of the Industrial Disputes Act.

20. The Supreme Court in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation and Ors., AIR 1993 SC 935 : 1993 (2) SCC 279, held that Sub-section (4) of Section 29 treats the Corporation to be a "trustee" of the debtor or person claiming title through him. The role of the Corporation while taking over the assets under Section 29 of the Act is to exercise their power in good faith in selling the property of the debtor as an ordinary prudent man would exercise in the management of his own affairs to preserve and protect his own estate, to pass a valid title to a purchaser and to secure as maximum price as possible to liquidate the liabilities of the debtor.

21. The question whether the HPSIDC would be a transferee in respect of the Unit of the First Company while taking over the assets of that unit would indeed depend upon whether the HPSIDC is transferee of that business, the answer cannot but be No. The HPSIDC while taking over the assets under Section 29 merely acted to secure their debts from the First Company. HPSIDC by no stretch can be said to be transferee of the business and therefore cannot be called successor of the First Company.

22. In my view in taking over of the possession of assets of a defaulter loanee, under Section 29 of the State Financial Corporation Act, the owner always retains the right of ownership of the property. It does not pass on to the Financial Corporation. The assets are taken over only for the purpose of effecting recovery of its dues by sale of the hypothecated assets and to convey good marketable title to the purchaser. The property does not absolutely vests in it. For example, if the realisation of the assets of the Company taken over, pursuant to Section 29 of the Act, exceeds the debt, the remaining amount is liable to be paid back to the Company whose assets are taken over under Section 29 of the Act.

23. The Apex Court in Narandas Karsondas v. S.A. Kamtam and Anr. AIR 1977 SC 774 : 1977 (3) SCC 247, held that right of redemption subsists till the mortgaged property actually put to auction and its registration. Even after taking over the assets under Section 29 of the State Financial Corporation's Act, a debtor can always pay the debts and get back the assets. Therefore, an action under Section 29 of the Act would not amount to transfer of the property to the concerned Corporation.

24. What is transferred to a vendee, even after sale of the assets, is the mortgaged property and not the business as such. For that reason too, it cannot be said that the HPSIDC was either assign or successor of First Company within the meaning of Section 18(c) of the Industrial Disputes Act.

25. A careful reading of Section 29 of the Act clearly shows that the purpose behind taking over the management or assets of the Company or both as industrial concern by the State Financial Corporation is to secure and realise the loan advanced to the concern and not to run the industrial concern and pay salaries to the employees.

26. From whatever angle we may look, the petitioner HPSIDC cannot be said to be successor of the First Company to fasten the liability of the wages of the workmen of the First Company. The impugned recovery certificate issued under the Section 33-C of the Industrial Disputes Act to the HPSIDC being arbitrary, illegal without jurisdiction and ultra vires of Section 33-C of the Industrial Disputes Act, is liable to be quashed along with the subsequent recovery proceedings pursuant to the recovery certificate (Annexure-PJ).

27. In result, the petition is allowed. Recovery Certificate issued by the Labour Commissioner (Annexure-PJ) is quashed and the subsequent recovery proceedings initiated against the HPSIDC by the Collector respondent Nos. 3 and 4 pursuant to Annexure-PJ are set aside. No costs.