In an order filed Thursday, U.S. Bankruptcy Court Judge John S. Dalis refused to dismiss the employees' involuntary bankruptcy petition by ordering that the case be stopped until further notice from him.

The employees withdrew their petition June 15 after a South Carolina U.S. District judge found them in contempt for filing it after she had appointed a receiver to oversee the sale of the assets of King Mill's parent company, Spartan International.

The employees were forced to withdraw the petition or face jail time or fines from Judge Margaret B. Seymour of Spartanburg, S.C.

Spartan International in Spartanburg closed six mills May 4 in Georgia, South Carolina and North Carolina when GE seized its assets. Overall 1,200 employees, including 306 at King Mill, lost their jobs, retirement funds and health insurance.

The employees are seeking the benefits because they were not given the 60-day notice of termination required by federal law.

In Thursday's order, Judge Dalis stated that the actions of General Electric Capital Corp., Spartan's principal creditor, caused the firing of the 1,200 employees without notice.

GE obtained from the South Carolina District Court an order May 22 appointing Peter Tourtellot receiver of all Spartan assets. The receivership order was issued without notice to the more than 6,500 creditors who should have received a copy before GE obtained the receivership.

Judge Dalis noted that Mr. Tourtellot works for GE.

''Mr. Tourtellot depends upon General Electric for approval of his budget, which would include payment of his fees,'' he stated.

While other creditors are supposed to get any money left after GE is paid, the King Mill employees' lawyer, Jack Long, said there won't be any left.

Judge Dalis criticized Mr. Tourtellot for selling King Mill, one of Spartan's principal assets, for $4.1 million without notice to other creditors, court approval, competitive bidding, an independent appraisal or determination of environmental concerns.

''Evidence presented before me indicates a fair market value for the King Mill of $23 million dollars,'' Judge Dalis states in his ruling. ''The only approval obtained by Mr. Tourtellot for the sale was from General Electric, and all of the proceeds from the sale were paid to General Electric.''

That was the main reason Judge Dalis ordered June 8 that the bankruptcy petition proceed and an interim trustee be appointed to oversee the disposition of the assets.

On the same day, Judge Seymour issued a temporary restraining order directing the employees to take no further action in the case until a June 11 hearing in Spartanburg. After that hearing, she found them in contempt and ordered them to withdraw their petition.

Now Judge Dalis states that if the bankruptcy court sends out the 6,500 notices as it must do by law to proceed, he would be inviting the creditors to violate Judge Seymour's order. So he will not do it until her order is modified or overturned by an appeals court.

The employees have appealed Judge Seymour's order to the Fourth Circuit Court of Appeals in Richmond, Va.

Reach Sylvia Cooper at (706) 823-3228