2001 (12) TMI 824 - HC - Companies Law

Summary

Issues Involved:
1. Whether 'arrears of salary' or 'salary due' to an employee can be treated as a 'debt' under Section 433(e) of the Companies Act, 1956.
2. Whether the company petition for winding up filed by the appellant is maintainable given the alleged bona fide dispute regarding the claims.
3. Whether the omission of the respondent company to reply to the statutory notice amounts to an admission of the appellant's claims.

Detailed Analysis:

1. Whether 'arrears of salary' or 'salary due' to an employee can be treated as a 'debt' under Section 433(e) of the Companies Act, 1956:
The court examined whether 'salary due' could be considered a 'debt' under Section 433(e) read with Section 434(1)(a). The term 'debt' is not defined in the Act, so it should be understood in its ordinary commercial parlance. The court referred to several authoritative definitions and judicial interpretations of 'debt', concluding that it generally means a sum of money that is presently payable or will become payable in the future due to a present obligation. The court held that an employee, upon completion of the wage period, acquires a right to claim salary, thus assuming the character of a creditor, and the company becomes a debtor. Therefore, 'salary due' can be considered a 'debt' within the meaning of Section 433(e).

2. Whether the company petition for winding up filed by the appellant is maintainable given the alleged bona fide dispute regarding the claims:
The court noted that the respondent company had denied the appellant's claims, stating that the claims related to a period when the factory was closed and the appellant did not work. The respondent also argued that the appellant had not provided satisfactory proof of his entitlement to the claimed amounts. The court emphasized that a winding up petition is not a legitimate means to enforce payment of a debt that is bona fide disputed. The court found that there was a bona fide dispute between the appellant and the respondent company regarding the claims, and thus, the petition under Section 433(e) was not maintainable.

3. Whether the omission of the respondent company to reply to the statutory notice amounts to an admission of the appellant's claims:
The court rejected the contention that the respondent company's failure to reply to the statutory notice amounted to an admission of the appellant's claims. It held that mere omission to reply or comply with the statutory notice does not mean that the company has admitted its liability. The court referred to previous judgments which held that failure to raise objections earlier does not affect the merits of the company's defense or constitute an estoppel against the company.

Conclusion:
The court dismissed the appeal, holding that the learned single judge did not err in law or act with material irregularity in dismissing the company petition at the admission stage. The court directed that the other company petitions (C.P. Nos. 165 and 166 of 1999) be placed before the learned single judge for disposal in accordance with law and in light of this judgment.