Khandelwal Tube Mill Kamgar Sangh vs Government Of Maharashtra And ...
2005 Latest Caselaw 971 Bom

JUDGMENT

F.I. Rebello, J.

1. The Apex Court by order dated August 5, 2004 has remitted the matter to this Court from an appeal which was filed against the order dated August 5, 2003. The matter has been remitted for deciding the inter se priority of dues of the workers and the Bank. Punjab National Bank had advanced monies to the Company under liquidation. Those amounts are now sought to be claimed by respondent No. 5, Asset Reconstructions Company (India) Limited. It is the contention of respondent No. 5 that the property which has been sold pursuant to notice issued under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as Securitisation Act) was mortgaged in their favour and charge was registered under the Companies Act and, therefore, they are secured creditors. In the notice served under Section 13 of the Securitisation Act the amount claimed was in the sum of Rs. 4.66 crores. The workmen of the Company had filed the present petition as they had orders in their favour in proceedings taken out under Section 33-C(2) of the Industrial Disputes Act in the sum of Rs. 2,41,89,797/-.

2. In the course of the hearing before us we have noted that there appears to be an omission under the Securitisation Act for protecting the interest of workers, when secured assets are sold consequent of which either the company cannot carry out its objectives or the sub-stratum disappears. We enquired of the counsel for the Petitioner as to why they have not proceeded before the Company Court for an order of winding up considering the order in favour of the workmen by the Industrial/Labour Court. Learned Counsel for the Union has drawn our attention to the Judgment of a learned single Judge in Mumbai Labour Union v. Indo French Time Industries Limited 2002-I-LLJ-179 (Bom) where a learned single Judge relying on the judgment of the Apex Court has taken a view that a worker cannot maintain a petition for winding up.

3. It is in view of that the learned Counsel has sought permission in the present writ petition to file a petition for winding up of the Company in view of the judgment of this Court in Mumbai Labour Union (supra). As the judgment has far reaching consequences to workers of a company, who may fall under the definition of Creditors, we have heard arguments on that point and are disposing of that issue by this order. The issue needs to be decided as we find an omission in the Securitisation Act, which in situation like the present case where there are no proceedings filed for winding up or the Company is wound up the monies realized from sale of the Company's assets will not be available to the workers under Section 529-A of the Companies Act even if the sub-stratum of the company disappears or because of the sale of assets it cannot carry out the objectives for which it was incorporated. A learned single Judge of this Court in the above case where the Union had approached the Company Court for winding up of the Company for the amount due to the Workers has taken the view that a workman has no right to file a Company Petition and that they have a legitimate and more efficacious remedy under labour laws for recovery of their dues from the Company. The learned Judge in so holding has relied on the judgment of the Apex Court in National Textile Workers Union v. P.R. Ramkrishnan and Ors. . The judgment in National Textile Workers Union (supra) was not in respect of a petition for winding up of a company filed by the workmen or the Union. The issue there was, in a case for winding up whether the Union of workmen had a locus standi to move the Company Court either to support the application for winding up or oppose the application for the winding up. The judgment, therefore, was no authority for the proposition that the workmen as creditors or for that matter the trade union which is person in law considering the provisions of the Trade Unions Act, cannot apply on behalf of the workers in a petition for winding up. Section 439 of the Companies Act provides as to who can move the Company Court, for winding up of the Company. Amongst them is a creditor or creditors including any contingent or prospective creditor or creditors. Under Section 433(e) one of the grounds for winding up of the Company is if the Company is unable to pay its debts, in which event Section 434 comes into play. Section 434 sets out that company shall be deemed to be unable to pay its debts if a creditor by assignment or otherwise, to whom the company is indebted in a sum exceeding Rs. 500/-, has served on the company by causing it to be delivered at its registered office by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter has neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditors. Though amendment have been made by Parliament to the Companies Act it appears that there is still no Notification making enforceable the provisions as amended. Even otherwise the amendment will have no bearing on the issue which is being considered. Therefore, all that is required is that there must be a creditor who serves a notice on the company and there is an amount due and payable for the sum of over Rs. 500/- which the Company on service of notice fails to pay or to secure or compound or explain. Under Section 529-A of the Companies Act brought by the amendment in 1985, the dues of workmen are considered pari passu with other secured creditors. In other words in the Companies Act itself, Parliament itself has taken note of the fact the workmen's dues in a case of winding up have to be placed on the same footing as secured creditors and have so treated workers dues. Even otherwise it will be difficult to hold that a workman like any other creditor to whom the company is indebted will not fall under the expression creditor under Section 439 of the Companies Act. Merely because there are other legislations, providing a forum for the workmen to apply for recovery of their dues cannot be an answer to deny to the workman as a creditor the right to file a petition for winding up as the jurisdiction of the Company Court is neither expressly nor impliedly barred by any labour legislation. The provisions of winding up are initiated in the case where the company is unable to pay its debts. It is not per se a suit for recovery of dues. It is a petition for winding up of the company which is unable to pay its dues. The learned single Judge appears not to have considered this aspect of the matter and appears to have been solely guided by the judgment in National Textile Workers Union (supra). We may make it clear that the petition for winding up by a workman would be as a creditor and not as a workman of the company. We are, therefore, unable to agree with the view taken by the learned single Judge in Mumbai Labour Union (supra).

4. In Mumbai Labour Union (supra), the Union on behalf of the workmen had filed a petition for winding up under Sections 433, 434 and 439 of the Companies Act. In answer to the Company Petition the defence of the Company was that the employees have alternate remedy under various labour laws and the Union had already filed a complaint of unfair labour practice under the provisions of M.R.T.U. & P.U.L.P. Act. The Company contended that the petition at the behest of the Union was not maintainable. In support of the contention that the Union had no locus standi, the company relied on the judgment of the Apex Court in National Textile Workers Union (supra). The learned single Judge reproduced and relied on para 7 of that judgment. After quoting from para 7, the learned Judge proceeded to hold that it is crystal clear that the workers have no right to prefer a petition for winding up of a company and if that be so a Union could also not present a petition. It is, therefore, clear that the entire judgment proceeds on the basis of the observations of the Supreme Court in Para 7, in National Textile Workers Union (supra). Let us, therefore, examine whether in fact the Apex Court has so taken the view. Let us briefly advert to some undisputed facts in that judgment. There was a dispute between two groups of shareholders. One group of shareholders who were also creditors filed the petition for winding up of the company. The Union applies for permission to intervene in the winding up petition. The learned Company Judge rejected the applications for intervention by the Union, by holding that under the Companies Act the workmen had no right either to get impleaded in the winding up petition or even to intervene in the winding up petition. An appeal was preferred before the Division Bench of that Court. The Division Bench while disposing of the winding up petition on the ground that it is just and equitable observed that the Company Court must consider the interest of the workmen but that does not mean that everybody who is remotely interested in the company can file an application to implead himself as a party in a petition for winding up. The appeal was rejected. Against that order an appeal came to be preferred before the Apex Court. The Apex Court posed the following question:

The question, briefly stated, is: when a petition for winding up a company is filed in a Court either workmen of the Company entitled to ask the Court to implead them as parties in the winding up petition or to allow them to appear and contest the winding up petition, or they have no locus standi at all so far as winding up petition is concerned and they helplessly watched the proceedings as outsider though the result of the winding up petition may bring out the termination of their services and thus affect them vitally by depriving them of their means to earn their livelihood.

5. It is this issue which was under consideration by the Apex Court. The issue was not whether a workmen as a creditor could file a petition for winding up. In para 7 the Apex Court has considered all the relevant provisions as to who can file a petition for winding up and for that purpose referred to Section 439 of the Companies Act. Section 439 sets put as to who can present a petition for winding up. The Court noted that workmen were not included. It is in that context that the Apex Court observed that it may be that the workers had no right to present a winding up petition against the company, but if a winding up petition is properly filed by any person entitled to do so under Section 439 they may still be entitled to appear and be heard in support or to oppose the petition for winding up. The observations by the Apex Court that the workmen cannot file a petition for winding up is based on what is set out in Section 439. Section 439 lists a company, creditor or contributory, the Registrar and the Central Government in circumstances provided there who can file a petition in the Company Court for winding up. Does that mean that a workman who may be creditor on account of unpaid wages or on account of an award in his favour or undisputed amount of terminal benefits as a creditor is prohibited from filing up a winding up petition. This issue was not at addressed nor answered by the learned single Judge. The learned single Judge only proceeded to decide the issue based on the judgment in National Textile Workers Union (supra) and that there were other labour legislations for the workmen to realize their dues. We are afraid that was a misreading of the judgment. As pointed out by us what was in issue was the right of the workers to be added as a party or to be impleaded in a petition filed for winding up of the Company. The Apex Court was not considering an issue whether the workman as a creditor was entitled to file a petition for winding up. The learned single Judge was considering an issue whether the Union could file a petition for winding up. At this stage we need not go into the issue, as to whether a Union can file a winding up petition. The question is whether a workmen as a creditor is prohibited from filing a petition. A creditor in order to maintain a petition must satisfy that the company is unable to pay its debts. A company will be said to be unable to pay its debts if the creditors comply with the requirement of Section 434, namely of serving a notice and delivering it at registered address and when the company is indebted in a sum exceeding 500/- rupees and the company for three weeks thereafter has neglected to pay the same or to secure a compound to the reasonable satisfaction of the creditors. Once this is established it is deemed that a company shall be deemed to be unable to pay debts. We are not dealing with the other considerations which the Court may take note of before passing an order for winding up. It is also a settled position that the creditor who has obtained a money decree against the company may give a notice required by Section 434 and if company does not pay the debt may apply for the winding up of the company and his right is not restricted to taking out execution proceedings. See All India General Transport Corporation Limited v. Raj Kumar Mittal 1978 (48) Company Cases 604. It is also a settled position that several creditors can join hands in filing winding up petition when they have common cause of action. Therefore, a workman who is a creditor in terms of Section 439(b) of the Companies Act is entitled to present a petition for winding up. The judgment of the learned single Judge to the extent that it has held that the workman has no right finds neither support in the judgment of National Textile Workers Union (supra) or under the provisions of the Indian Companies Act.

6. We, therefore, overrule the said judgment to that extent. We are however at this stage not dealing with the issue whether the union can file a petition and leave that question open. In view of that the permission sought by the workmen to file Company Petition need not be considered as they have an independent right to maintain a Company petition.