GDCL not authorised to sell Jaipur Udyog Ltd assets: Supreme Court ruling and implications for workers’ dues

1. Background of the dispute

The matter before the Supreme Court arose from a long‑pending industrial and corporate dispute concerning Jaipur Udyog Ltd (JUL), a company which had a cement unit at Sawai Madhopur (Rajasthan) and a jute mill at Kanpur (U.P.). JUL had been declared a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) on 17.09.1987 by the Board for Industrial and Financial Reconstruction (BIFR).

A group of labour unions, including Bhartiya Mazdoor Sangh, approached the Supreme Court by way of a writ petition seeking, among other reliefs:

  • A direction to pay long‑outstanding wages and statutory dues of workers of JUL and its units, including the Kanpur jute mill.
  • Implementation of the Award dated 05.12.2008 passed by Justice N.N. Mathur (Retd.) in favour of the workmen.
  • Declaration that the date on which JUL was declared sick under SICA should operate as the cut‑off date for implementing the said award.
  • A direction to BIFR to sell JUL’s assets, recover workmen’s dues, and distribute the proceeds to the workmen.

Over time, multiple trade unions, JUL, Gannon Dunkerley & Co. Ltd. (GDCL), and several third‑party applicants became involved in the proceedings. The litigation expanded from a wage‑payment dispute into a complex contest over control and disposal of JUL’s and its subsidiary’s assets, the validity of sales undertaken by GDCL, and competing rehabilitation or takeover proposals.

2. Sick‑company proceedings, rehabilitation attempts and winding‑up recommendation

2.1 Initial rehabilitation scheme under SICA

  • JUL was declared a sick company on 17.09.1987 under Section 3(1)(o) of SICA.
  • BIFR appointed Industrial Reconstruction Bank of India (later IIBI) as the Operating Agency.
  • On 23.08.1990, GDCL proposed a rehabilitation plan to take over and revive JUL.
  • By order dated 21.04.1992, BIFR sanctioned a rehabilitation scheme based on GDCL’s proposal. Broadly:
    • JUL was to be revived as a going concern.
    • Only surplus or scrap assets could be sold, and the sale proceeds had to be used for renovation of the plant.
    • GDCL was expected to bring in its own funds; banks and financial institutions granted waivers and concessions.

The workers challenged the approval of GDCL’s scheme before AAIFR, which ultimately upheld the scheme on 13.04.1993. GDCL deposited significant sums (including ₹3.035 crores and later further amounts) under directions issued in those proceedings.

2.2 Failure of scheme and recommendation for winding up

  • On 19.09.1994, BIFR recorded that the sanctioned scheme was not implementable and called for fresh proposals, effectively rendering the 1992 scheme inoperative.
  • GDCL challenged this before AAIFR, which stayed the BIFR order on 30.09.1994 and, on 11.11.1994, directed transfer of JUL’s management to GDCL.
  • Due to factors such as a State forest notification halting mining and labour unrest, the Sawai Madhopur cement unit was closed.
  • Eventually, BIFR issued a show‑cause notice for winding up of JUL and, by order dated 24.11.2000, recommended winding up of JUL to the Rajasthan High Court.

JUL, with GDCL acting as promoter/management, appealed to AAIFR, which granted interim stay but dismissed the appeal on 06.09.2001, noting JUL’s liabilities exceeded ₹100 crores and rehabilitation was not feasible. JUL then approached the Rajasthan High Court, which on 02.08.2004 set aside AAIFR’s order and remanded the matter.

A labour union, Cement Work Karamchari Sangh, carried the matter to the Supreme Court in SLP(C) No. 4088 of 2005, focusing primarily on non‑payment of workers’ dues.

3. Role of Justice N.N. Mathur’s Award and Supreme Court orders

During the Supreme Court proceedings, the following key steps occurred:

  1. Settlement of 2006: Two unions entered into a settlement with JUL (managed by GDCL). The Supreme Court permitted the settlement on 04.12.2006, but this was without prejudice to rights and contentions of other parties.

  2. Appointment of Justice N.N. Mathur (Retd.):

    • On 10.04.2007, the Court appointed Justice N.N. Mathur (Retd.) to quantify dues of different categories of workmen.
    • On 24.03.2008, in Civil Appeal No. 2076 of 2008, his role was formalised as an Arbitrator under Section 10-B of the Industrial Disputes Act, 1947 as applicable in Rajasthan.
    • On 05.12.2008, Justice N.N. Mathur (Retd.) delivered his Award, laying down the principles and percentages for calculating workers’ dues; the cut‑off date was to be later settled and modalities left to BIFR/AAIFR.

  3. Persisting non‑payment: Despite the Award, the workmen remained unpaid for decades. This triggered the writ petition by Bhartiya Mazdoor Sangh seeking implementation of the Award and recovery of dues from JUL/GDCL.

4. Repeal of SICA, non‑use of IBC route, and consequences

With effect from 01.12.2016, SICA was repealed, BIFR and AAIFR were abolished, and all proceedings pending before these forums abated. The Insolvency and Bankruptcy Code, 2016 (IBC) allowed companies whose cases were pending before BIFR/AAIFR to initiate fresh proceedings before the National Company Law Tribunal (NCLT) within 180 days.

In the case of JUL: