contributories the industrial undertaking should be solid as a running concern, as provided in section 18-FE thereof it may by order decide accordingly. Sub-section (2) of section 18-FD of that Act states that notwithstanding anything contained in sub-section (1) thereof the Central Government may prepare a scheme for reconstruction of a company if it is satisfied having regard to all relevant circumstances mentioned therein that it is proper to do so. When such a scheme is prepared, the Central Government has to send it to the registered trade unions, if any, of the employees concerned for their suggestions and objections. (See section 18-FF(3)). Any scheme finally approved would prevail notwithstanding anything contained in sections 391 to 394-A (both inclusive) of the Act. It is open to the workers or their trade unions to move the Central Government to take appropriate steps under the aforesaid provisions in order to protect the interests of the workers who are likely to be affected by the winding-up orders.
Article 43A of the Constitution clearly states that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings, establishments or other organisation engaged in any industry. The High-powered Expert Committee on Companies and MRTP Acts headed by Justice Rajinder Sachar of the Delhi High Court has also made certain recommendations about provisions to be made for workers' participation in management of companies. (Vide paragraphs 18.127 to 18.143 of the Report). Parliament may take early steps to implement some of the recommendations made by the said Committee. It is significant that there is no recommendation made even in this Report about the right of trade unions to contest winding-up petitions. If the workers are issued shares then they would no doubt be entitled to participate in the winding-up proceedings as contributories. This may be one way of solving the problem by legislative means. Another way of providing a forum to the workers representative in matters relating to the winding-up of a company is to amend section 292 of the Act as suggested in para 11.27 and para 18.137 of the Report of the Sachar Committee. Those paragraphs are reproduced below for ready reference:
"11.27 The workers' representation on company Board makes it necessary to provide that companies must ensure that certain decisions are necessarily taken at the Board level and the Board do not delegate 978
the powers in respect of these matters to committees or other functionaries in the organisation, otherwise the participation of workers at the Board level is likely to prove ineffective. The powers and functions which cannot be delegated by the Board, and which must be within the exclusive jurisdiction of the Board to take policy decision are in respect of the following matters:-
(a) winding-up of the company;
(b) changes in the memorandum and articles of association;
(c) changes in the capital structure of a company (e.g. as regards the relationship between the Board and the shareholders a reduction or increase in the share capital; as regards the relations between the Board and senior management, the issue of securities on a takeover or merger);
(d) disposal of a substantial part of the undertaking; (e) the allocation or disposition of resources to the extent not covered in (a) to (d) above; and
(f) the appointment, removal, control and remuneration of management, whether as members of the Board or in their capacity as executives or employees. The suggestion regarding (a) to (e) above is on the same line as the present power of the Board to declare dividend. In other words, the shareholders will not be able to exercise powers mentioned in (a) to (e) above unless recommended by the Board. We would, therefore, suggest that section 292 be amended to provide for the exercise of the foregoing powers of the Board of a company which is required by law to ensure participation of workers in management."
"18.137 In order to ensure effective participation by workers' representatives at the Board level section 292 should be amended to provide that certain decisions are necessarily taken only at the Board level and no delegation to Committees of the Board or to other functionaries is made."
These suggestions emphasise that at present workers have no right to contest winding-up proceedings. It is also open to Parliament to make a law on the lines of sections 63 to 69 of the Employment Protection Act, 1975 passed by the Parliament in the United Kingdom to give any additional protection necessary for workmen who are likely to be affected adversely by the winding-up proceedings. (See Palmer's Company Law (22nd Edn. Vol. I, p. 919)). Parliament may also consider the introduction of a provision corresponding to section 74 of the Companies Act of 1980 passed by the British Parliament. Such steps may mitigate any hardship that may be caused to the workers as a consequence of the winding-up of a company.
It has to be emphasised that the privilege of making suggestions to the Court in the public interest is different from the right to be impleaded as a party with the concomitant right to enter into contest with the other parties and of taking an order in appeal before higher courts. The latter right has to be conferred expressly by the statute on any person who wishes to exercise it. Under the existing law, the workers or their unions may make any suggestions to the Court at any stage but they cannot claim to be impleaded as parties to the winding-up petition as of right.
The decision of this Court in Fertilizer Corporation Kamgar Union (Regd.), Sindri and Ors. v. Union of India and Ors.(1) does not lend any support to the case of the trade unions. In that case which attracted the principles of administrative law the petitioner trade union pleaded that Article 14, Article 19(1)(g) and Article 311 of the Constitution had been violated by the sale of the plant and equipment of a factory in which its members were working. Ultimately the petition was dismissed by this Court. One of the distinguishing features of that case is that the factory involved in that case was in the public sector and owned by the Government against which a petition under Article 32 of the Constitution was maintainable. Chandrachud C.J. observed in the course of his judgment at pages 60-61 thus: "Secondly, the right of Petitioners 3 and 4 and of the other workers to carry on the occupation of industrial workers is not, in any manner affected by the impugned
sale. The right to pursue a calling or to carry on an occupation is not the same thing as the right to work in a particular post under a contract of employment. If the workers are retrenched consequent upon and on account of the sale, it will be open to them to pursue their rights and remedies under the Industrial laws. But the point to be noted is that the closure of an establishment in which a workman is for the time being employed does not by itself infringe his fundamental right to carry on an occupation which is guaranteed by Article 19(1)(g) of the Constitution. Supposing a law were passed preventing a certain category of workers from accepting employment in fertiliser factory, it would be possible to contend then that the workers have been deprived of their right to carry on an occupation. Even assuming that some of the workers may eventually have to be retrenched in the instant case, it will not be possible to say that their right to carry on an occupation has been violated. It would be open to them, though undoubtedly it will not be easy, to find out other avenues of employment as industrial workers. Article 19(1)(g) confers a broad and general right which is available to all persons to do work of any particular kind and of their choice. It does not confer the right to hold a particular job or to occupy a particular post of one's choice. Even under Article 311 of the Constitution, the right to continue in service falls with the abolition of the post in which the person is working. The workers in the instant case can no more complain of the infringement of their fundamental right under Article 19(1)(g) than can a Government servant complain of the termination of his employment on the abolition of his post. The choice and freedom of the workers to work as industrial workers is not affected by the sale. The sale may at the highest affect their locum, but it does not affect their locus, to work as industrial workers. This is enough unto the day on Art. 19(1)(g)."
On the question of locus standi of workers to maintain the petition, the learned Chief Justice observed at pages 65-66 thus:
"That disposes of the question as regards the maintainability of the writ petition. But, we feel concerned to point out that the maintainability of a writ petition which
is correlated to the existence and violation of a fundamental right is not always to be confused with the locus to bring proceedings under Article 32. These two matters often mingle and coalesce with the result that it becomes difficult to consider them in water-right compartments. The question whether a person has the locus to file a proceeding depends mostly and often on whether he possesses a legal right and that right is violated. But, in an appropriate case, it may become necessary in the changing awareness of legal rights and social obligations to take a broader view of the question of locus to initiate a proceeding, be it under Article 226 or under Article 32 of the Constitution. If public property is dissipated, it would require a strong argument to convince the Court that representative segments of the public or at least a section of the public which is directly interested and affected would have no right to complain of the infraction of public duties and obligations. Public enterprises are owned by the people and those who run them are accountable to the people. The accountability of the public sector to the Parliament is ineffective because the parliamentary control of public enterprises is "diffuse and haphazard". We are not too sure if we would have refused relief to the workers if we would have found that the sale was unjust, unfair or mala fide."
Krishna Iyer, J. in his concurring opinion observed at pages 70-71 thus:
"A pragmatic approach to social justice compels us to interpret constitutional provisions, including those like Arts. 32 and 226, with a view to see that effective policing of the corridors of power is carried out by the court until other ombudsman arrangements-a problem with which Parliament has been wrestling for too long-emerges. I have dwelt at a little length on this policy aspect and the court process because the learned Attorney General challenged the petitioner's locus standi either qua worker or qua citizen to question in court the wrong doings of the public sector although he maintained that what had been done by the Corporation was both bona fide and correct.
We certainly agree that judicial interference with the Administration cannot be meticulous in our Montesquien
system of separation of powers. The court cannot usurp or abdicate, and the parameters of judicial review must be clearly defined and never exceeded. If the Directorate of a Government company has acted fairly, even if it has faltered in its wisdom, the court cannot, as a super-auditor, take the Board of Directors to task. This function is limited to testing whether the administrative action has been fair and free from the taint of unreasonableness and has substantially complied with the norms of procedure set for it by rules, of public administration."
A reading of the aforesaid passages shows that the Court was concerned in that case with operations in a public sector company and the activities of the Government. These observations cannot have any relevance to a case involving the affairs of a company which is governed only by express provisions of company law and other relevant statutes. As the law stands today, workers cannot contend that a factory owned by and individual proprietor, on his death, should not be divided amongst his heirs, even though they may lose their jobs. They cannot resist a partition suit, in which one of the items of property in respect of which relief is claimed is the factory in which they are working, filed by a junior member of Hindu joint family against the manager contending that the said factory is the separate property of the manager and should not, therefore, be partitioned merely because they may be discharged from service in the event of the suit being decreed. They cannot resist the suit for dissolution of a firm which owns the factory in which they are working even though at the distribution of the assets of the firm, the factory may have to be dismantle and sold. The position cannot be different in the case of a company which is wound up by the Court. As the law stands today, the workers in a factory owned by a company do not have any hand in the birth of a company, in its working during its existence and also in its death by dissolution. If the law expressly says that a memorandum of a company should be signed by some future employees of the company, or that there should be workers' representatives on its board of directors or that the company should not be wound up without consulting the wishes of the workers, then they can certainly claim all such rights. Workers' participation in the affairs of a company or the ushering in of an industrial democracy is quite a laudable object. That is the reason
for enacting Article 43-A of the Constitution which requires the State to take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry. The Legislature has not taken any concrete steps in this regard. But, can the Court step in and introduce drastic amendments into the company law ? Surely, it cannot. Even though there is no express statement in our constitutional law incorporating in it the doctrine of separation of powers, in the interpretation of the Constitution this Court has broadly adopted the said doctrine. (See Smt. Indira Nehru Gandhi v. Shri Raj Narain (1). Even though by virtue of its power of interpretation of law the Court in an indirect way is making law, it should be stated that there are well recognised limitations on the power of the Court making inroads into the legitimate domain of the Legislature. If the Legislature exceeds its power, this Court steps in. If the Executive exceeds its power, then also this Court steps in. If this Court exceeds its power, what can people do ? Should they be driven to seek an amendment of the law on every such occasion ? The only proper solution is the observance of restraint by this Court in its pronouncements so that they do not go beyond its own legitimate sphere.
It is true that there are now new kinds of weapons like consumers' protection agitations against big companies whose activities are likely to affect the life of the community adversely. But, for those agitations to be effective the Legislature should wake up and make appropriate laws under which the consumers can bring action against erring companies. In the absence of any such law, this Court cannot issue directions to the companies on the basis of complaints from the members of the public.
There are several areas where it is necessary for the Legislature to make law. A reading of the provisions in Part IV of the Constitution shows that many of them are still to be implemented by the passing of appropriate legislation. Article 41 of the Constitution dealing with the right to work, Article 43 dealing with living wages etc for workers, Article 44 which insists upon the introduction of a uniform civil code for all citizens and Article 47 dealing with the duty of the State to raise the level of nutrition and the standard of living of the people are some of the articles which have to be implemented either by the Legislature or by the Executive.
Would this Court compel the Executive by issuing a writ to implement the policy underlying Article 41, Article 43 and Article 47 without being backed up by necessary laws ? Would this Court enforce a uniform civil code in respect of all citizens, without the aid of an appropriate legislation even though the concept of equality is enshrined in the Constitution and Article 44 specifically requires the State to endeavour to secure for all citizens a uniform civil code ? It may not do so The only solution for many of these social problems is to appeal to the appropriate organs of the State to do their assigned job in the best interests of the Community. It is wrong to think that by some strained construction of law, the Court can find solution to all problems.
In this very case, when arguments were going on I suggested that it may be appropriate to issue notice to the Company Law Administration of the Union of India so that the Court could have the benefit of the views of the Government. It was not, however, acceded to by the majority. The presence of the Union Government in the present case as a party might have brought to its attention the need for initiating necessary legislation, if it really felt that it was advisable to do so, for providing an opportunity to workers of a company also to contest the winding-up proceedings. It is, however, a matter for regret that no tangible steps appear to have been taken to amend the Act even though the Sachar Committee Report which contains many recommendations which when implemented would make the companies which are centres of economic power accountable to the society at large and make them fall in line with the current views on their social responsibilities, was forwarded to the Government more than four years ago. It may be that the employees or their trade unions are interested in requesting the Court to dispose of the factory as going concern so that their employment may not be affected. How are they interested in supporting one set of directors against whom charges of waste, misappropriation and mismanagement are made by the other set who are alleged to have been totally excluded from management by attempts amounting to oppression ? In the instant case the trade unions concerned have filed almost a common statement containing their grounds of objection along with their notice to appear in the proceedings filed under Rule 34 of the Companies (Court) Rules 1959 pursuant to the advertisement issued by the
Court. The grounds of objection filed by the Coimbatore District National Textile Employees' Union are set out below in extenso :
1. That the Company Petition is not maintainable under the Companies Act, 1956, hereinafter referred to as the `Act'.
2. That no case has been made out by the petitioners under section 433(f) of the Act.
3. That, on the facts and circumstances of the case, it is not just and equitable that the company should be wound up.
4. That another remedy is available to the petitioners and hence the Company cannot be wound up by virtue of section 443(2) of the Act.
5. That the objector craves leave to reserve his right to amplify and elaborate the above grounds in the counter affidavit to be filed to the company petition."
It is seen from the foregoing that the trade unions are only interested in supporting the cause of the respondents against whom allegations are made by the petitioners in the Company Petition by making certain general submissions, without traversing the various allegations made in it. The respondents who are already on record and who are actually contesting the petition are capable of looking after their interests and need not rely upon the support of the trade unions who are neither creditors nor contributories and who do not know the details of the internal administration of the affairs of the Company. The petitioners in the Company Petition would be in a more disadvantageous position if they have to face the opposition of the trade unions also. Such a situation should not be created by extending the area of controversy by a liberal interpretation of the provisions of law when there are no compelling reasons to do so. The High Court has in this case passed necessary orders in order to protect the interests of the employees in Company Application No. 844 of 1981 and in C.M.P. No. 11159 of 1981. The order passed in Company Application No. 844 of 1981 is already set out above.
In C.M.P. No. 11159 of 1981 the High Court has passed the following order:-
"This is a petition filed by the appellants in O.S.A. No. 128 of 1981 for permitting the first appellant/company to raise with its Bankers viz., Bank of Baroda, Coimbatore, a temporary loan of an amount not exceeding Rs. 5,25,000 for the purpose of paying bonus to the workers of Jothi Mills, as per the Memorandum of settlement entered into between the Company and its workers under section 18(1) of the Industrial Disputes Act, 1947 on 10.10.1979 by pledging or charging the assets of the Company...............Though in form the appellants have prayed for raising of a loan for honouring the commitment of Rs. 5,25,000 towards bonus for the workers of Jothi Mills by pledging or charging the assets of the company during the argument the learned counsel for the appellants was willing to avail of the existing facilities in the Central Bank as provided in the order Itself. Though for availing the existing bank facilities there is no need for any specific direction from this Court as the order appealed against itself gives such liberty, the learned counsel for the appellants by way of abundant caution requires such an interim direction in this petition. The learned counsel for the respondents pointed out that availing of the existing facilities referred to in the order of Shanmukhan, J., is a facility that was available as on 13.7.1981 we think the learned counsel for the respondents is well-founded in this contention. (sic) But even so if the Banks as on 13.7.1981 the petitioners are entitled to avail the same in order to honour the commitment relating to bonus for workers. Since the order under appeal itself permits the petitioners to avail of the existing Bank facilities with any of its Bank though the application in form asked for raising of the loan with the Bank of Baroda, Coimbatore, we make it clear that it is open to the petitioners to avail of the Bank loan facilities with the Central Bank within the limits prescribed as on 13.7.1981. This is the only clarification that need be given in this petition and no further orders are necessary."
These orders show that the High Court has kept in its view the interests of workers while giving directions in the case from
time to time and that there is no longer any ground to complain about. According to the petitioners in the winding- up petition the occasion for the complaint of the workers had been cleverly engineered by the contesting respondents. Be that as it may, as the orders of the High Court stand today the workers can always approach it by way of a company application for appropriate orders whenever they feel that their working conditions are adversely affected during the pendency of the proceedings. It is not necessary that the workers or the trade unions should be impleaded as parties to the Company Petition enabling them to contest the winding-up petition. Their presence on record is not necessary for complete and effectual adjudication of the winding-up petition. The trade unions are, therefore, neither necessary nor proper parties to the winding-up petition on the facts and in the circumstances of this case including the element of public interest involved in any liquidation proceeding.
Before concluding it should be stated that it is not correct to hold that the order of the High Court `smacks of elitism' or `sounds like a relic of feudal age' or is an `obnoxious' one. The High Court has decided the case in accordance with the prevailing view in the country. No case in which a different view is taken is cited before us. Nobody disputes the proposition that law should not be static. It should no doubt grow but it should have its legitimate birth and in a case like this in the precincts of the Legislature. It should be the result of the exercise of legislative judgment, particularly when a departure from express provisions of a statute or an established practice is to be made. Judges are not expected to know all aspects of every such matter. A discussion involving a comprehensive view of all interests which are likely to be effected by any decision which makes a serious departure from a well-settled principle of law would not take place before a court where only the parties to a case or their lawyers are heard. Members of the public also would not know what is happening in courts. The publicity which a proceeding in the Legislature would receive is not given to the proceedings in Court. Even the elected representatives of the people who are charged with the duty of making laws may not know what is happening in a court of law. Therefore, it is always better to leave such matters to the decision of the Legislature, instead of the court, sometimes by a majority of one assuming power to make a new law.
It is no doubt true that the view of the High Court is also in conformity with the view prevailing in England. That does not mean that the High Court has surrendered its judgment to a foreign
practice, because that is the very view which is being followed till now in the Indian courts. We should not forget that the very concept of company law is foreign to our country. It originated in Great Britain and our company law contained in successive Acts passed by the Indian Legislature is modelled on British law and experience. There is a large body of company jurisprudence which is common to all the Commonwealth countries. There may, however, be some local changes but the pattern appears to be common. The practice of relying on foreign decisions whatever may be their age only when they are in conformity with what we wish to hold and of condemning them only on the ground that they are ancient foreign decisions when they do not accord with our views is not correct. A foreign decision (even though it may not be binding) is either worthy of acceptance or not depending upon the reasons contained in it and not on its origin or age. There is no reason why we should not follow a well reasoned foreign decision unless it is opposed to our ethics, tradition and jurisprudence or otherwise unsuited to Indian conditions. Can we say that the law of habeas corpus which has found its way into India from England is bad only because it came from a foreign country or has an ancient origin ? The writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari referred to in Art. 32 and Art. 226 of the Constitution of India, the rule of promissory estoppel, the principle of audi alterum partem and many other principles which are applied by the Indian courts are all of foreign origin. Even the socialist principle is not entirely of Indian origin. It is difficult to shut our eyes to realities of life.
Moreover, it is difficult even though it may not be impossible to administer the company law as it is now in force in India without the aid of the principles laid down by some of the leading English cases like Salomon v. Salomon & Co.(1) laying down the principle of corporate personality, Ashbury Railway Carriage & Iron Co. v. Riche(2) dealing with the rule of ultra vires, Royal British Bank v. Turguand(3) laying down the rule of `indoor management', Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.(4) which establishes the liability for negligent mis-statements in prospectuses, Foss v.
Harbottle(1) and Burland v. Earle(2) dealing with the principle of `the fraud on a minority' and Ebrahimi v. Westbourne Galleries(3) dealing with the application of the `just and equitable' principle in ordering the winding-up of a company. A reading of the decision of this Court in Needle Industries (India) Ltd. & Ors. v. Needle Industries Newey (India) Holding Ltd. & Ors.(4) rendered by Chandrachud, C.J. shows the importance of foreign decisions in deciding case arising under the Indian Company law which out of necessity has to keep pace with the well established principles prevailing in many other parts of the world for sustaining international trade and commerce. Adoption of an universal system of mercantile law and obedience to the conventions of the International Labour Organisation constitute two important compulsions of modern international economic life. It may be that the workers who are likely to be affected by the winding-up need a larger protection. That can be done only by legislative action. This Court cannot, however, make any order which will conflict with the existing law. In the result the appeals fail and are dismissed. No costs.
BAHARUL ISLAM, J. I have carefully read the judgments prepared and orders proposed by my Brothers Bhagwati and Venkataramiah JJ. I entirely agree with Bhagwati J. and regret my inability to agree with Venkataramiah J. Any provision of any statute has to be interpreted keeping in view the letter and spirit of the Constitution. Any interpretation that is not in consonance with the letter and spirit of the Constitution is obnoxious and unacceptable. In the winding-up proceedings in question, the National Textile Workers' Union filed the petition before the High Court with a prayer to be heard before any order for winding-up was passed. The reason was the workers' apprehension of termination of their services in case of winding up of the Company. It is true, there is no express provision in the Companies Act giving the workers any right to be heard in a winding up proceeding before the Court. There is no express bar either. Learned counsel for Respondents Nos. 6 to 9, in support of his contention that the workers had no right to be
heard in a winding up proceeding, cited Halsbury's Laws of England, volume 7 page 614 para 1028 (4th Edition). The learned author has stated the law on the subject thus : "Only the petitioner, the Company and creditors and contributories are entitled to appear on the petition ; other parties have no right to be heard, and even if the Court at the first instance elects to hear them as amici curiae, they have no right of appeal." This statement of the law has been made on the authority of the judgment in Bradford Navigation Co. rendered as early as 1870: (1970) 5 Ch. A, Page 600). Learned counsel also cited Palmer Company Precedents (17th Edition) Vol. 2, page 77, in which the law to the above effect was stated. Learned counsel has submitted that the Company Law in India is the same as in the Company Law in England. The law cited may be good law for England with altogether a different system of economy ; but is abhorrent to India, particularly after the Constitution (42nd Amendment) Act, 1976, by which the "Socialist" and "Secular" concepts have been added and incorporated into the Preamble of our Constitution. Our `Democratic Republic' is no longer merely `Sovereign' but is also `Socialist' and `Secular'. A Democratic Republic is not Socialist if in such a Republic the workers have no voice at all. Our Constitution has expressly rejected the old doctrine of the employers' right to `hire and fire'. The workers are no longer ciphers ; they have been given pride of place in our economic system. The workers' right to be heard in a winding-up proceeding has to be spelt out from the Preamble and Articles 38 and 43-A of the Constitution and from the general principles of natural justice.
AMARENDRA NATH SEN, J. I have read the judgment of my learned brother Bhagwati, J. and also the judgment of my learned brother Venkataramiah, J. I cannot persuade myself to agree with the judgment of my learned brother Bhagwati, J. I agree with the judgment and order proposed by my learned brother Venkataramiah, J. I shall indicate my reasons for the view that I have taken.
The material facts of this case have been set out in the judgment of my learned brother Bhagwati J. and also in the judgment of my learned brother Venkataramiah, J. The arguments advanced
from the Bar have been considered by both of them. It does not, therefore, become necessary for me to reproduce them in this judgment.
Whether the employees of a Company in their capacity as employees can claim as a matter of right to appear and be heard in a petition presented to court for the winding-up of the Company, is the question for decision in this case. The right of an employee in his capacity as such to be heard in a proceeding for winding-up of a company has been canvassed as a proposition of law. The contention urged on behalf of the trade unions representing the workers of the company is that whenever a petition is presented to a Court for the winding up of a company, the employees of the company have the right to appear and be heard in the said proceeding.
The principal argument advanced on behalf of the trade unions representing the workers is that the employees of a company are equal partners of the management of the company, if not the more important one, and the company, in view of the socio-economic role it plays and it has to play in the country, can no longer be considered to be the concern of the members of the company. Further, the argument is that the employees very materially contribute to the working of a company and help the company in effectively playing its socio-economic role and promoting the interests not only of the company, but also the larger interests of the nation and an order of winding up seriously affects the interest of the employees, virtually taking away the means of their livelihood. It has been submitted that as an order of winding up of the company affects so seriously the interests of the employees, the employees must have a say and must be heard in a proceeding for winding up before the Court. I have earlier observed that the arguments advanced from the Bar on behalf of the trade unions have been noted at length by my learned brothers Bhagwati and Venkataramiah, JJ. The arguments no doubt express noble sentiments which I share ; but, in my opinion, the arguments fail to establish that the employees have a right to appear and be heard in a petition presented to a Court for the winding up of a company. If the right is to be conceded to employees on these grounds it must logically follow that every employee of a company, whether he is a worker within the meaning of the Industrial Disputes Act or he is a member of the management
staff, must enjoy the same right to appear and be heard in every such proceeding for the winding up of the company. An order for winding up affects all the employees of a company, whether they are workers belonging to any trade union or not or whether they are officers of the company, high or low, not being members of any union or association. Further if the right to participate in a winding up proceeding is to be judged from the view point of the interest of any party who may be prejudicially affected as a result of an order of winding up being made, various other parties who have trade relations with the company must necessarily be held to have the same right to be heard in a winding up proceeding. It is common knowledge that various persons, apart from the employees of the company, also depend for their survival on the supplies of various materials, ingredients and components to the company and with the liquidation of a company, all such persons who are making their living out of their dealings with the company have to go without occupation and have to face disaster. Persons having existing contracts with the company are also seriously prejudiced when an order of winding up of the company is made.
If the test of injury and adversely affecting the interests are considered to be sufficient to entitle a party to a hearing in a proceeding on the footing that they are persons aggrieved, no suit for dissolution of a partnership can also be decided without impleading the employees of the firm and various other parties having trade relations with the firm, as the dissolution of a firm may prejudicially affect the interests of the employees or the various other persons dealing with the firm.
It has to be borne in mind that a company can only be wound up in accordance with the provisions of the Indian Companies Act. The right to have a company wound up is a right created by the Statute. The entire proceeding in relation to the winding up of a company is regulated by the statute, namely, the Indian Companies Act (hereinafter referred to as the Act) and the procedure to be followed is further supplemented by the provisions contained in the rules made under the Act known as the Companies (Court) Rules, 1959 (hereinafter referred to as the Rules). The various modes of winding up of the company, under what circumstances a company may be wound up by Court and who are the persons competent to present a petition to Court for the winding up of the company and who are the persons entitled to
be heard on such a petition, are provided for in the Act and in the Rules.
It has to be borne in mind that apart from the right of the Court to order the winding up of a company in an appropriate case, the Act recognises that a company may go into liquidation without any intervention by the Court and also under the supervision of Court, provided the necessary conditions laid down in the Act in this regard are complied with. Where the Company goes into liquidation without reference to court or under the supervision of the Court, the employees of the company who have to meet the same fate of losing their employment, as and when the company is wound up by the Court, do not and cannot have any voice or say in the procedure to be adopted for the liquidation of the company.
In the case of winding up of any company by Court, the parties who can move the Court for winding up of the company are specifically mentioned in the Act and only such persons are competent to present the winding up petition. The procedure to be followed on such a petition for winding up of the company being presented to court and the parties who are entitled to be heard on the petition are dealt with and provided for in the Act and the Rules. The right of appearance and of being heard in a winding up proceeding has been conferred on persons whom the Legislature considered to be necessary or proper parties for effective adjudication of the proceeding before the Court. The Act provides that a creditor to whom a company is indebted in a sum exceeding Rs. 500 and whose debt has not been paid by the company notwithstanding the statutory notice being served on the company is entitled to present a petition for the winding up of the company and in such a case, the creditor whose debt cannot be properly disputed, is entitled to an order of winding up on the ground of insolvency of the company. If a company is commercially insolvent and is unable to pay its debts, the company has necessarily to be wound up and the employees of the company can have hardly anything to say in such a case for assisting the Court in deciding the matter. My learned brother Venkataramiah, J. has referred to the various provisions of the Act and also to relevant Rules, which go to indicate that no such right of the employees to appear and participate in a winding up proceeding is recognised. Rule 34 of the Rules on which strong reliance was placed by the learned counsel 994
appearing on behalf of the trade unions, is not of any assistance. The said Rule reads as follows:- "Every person, who intends to appear at the hearing of a petition, whether to support or oppose the petition, shall serve on the petitioner or his advocate, notice of his intention at the address given in the advertisement. The notice shall contain the address of such person, and be signed by him or his advocate, and same as otherwise provided by these rules shall be served (or if sent by post, shall be posted in such time as to reach the addressee) not later than two days previous to the day of hearing, and in the case of a petition for winding up not later than five days previous to the day of hearing. Such notice shall be in Form No. 9, with such variations as the circumstances may require, and where such person intends to oppose the petition, the grounds of his opposition or a copy of his affidavit if any, shall be furnished along with the notice. Any person who has failed to comply with this rule shall not except with the leave of the Judge, be allowed to appear at the hearing of the petition." This particular Rule appears in Part I and in Part I of the Rules, general provisions are made. This Rule only lays down the procedure to be followed by any person who intends to be heard at the hearing of a petition, whether to support or oppose the petition, and this Rule does not deal with the competence or right of any particular person to appear at the hearing of any petition nor does this rule create any right in any person. Part III of the Rules makes specific provisions with regard to winding up by Court. Rule 9B in Part III reads:-
"Every contributory or creditor of the company shall be entitled to be furnished by the petitioner or by his advocate with a copy of the petition within 24 hours of his requiring the same on payment of the prescribed charges."