2005 (9) TMI 309 - HC - Companies Law

Summary

Issues Involved:
1. Non-payment of terminal dues to petitioners.
2. Legal relationship between petitioners and respondent-company.
3. Limitation period for claiming dues.
4. Maintainability of winding-up petition by an employee.
5. Definition and scope of 'debt' under the Companies Act.
6. Jurisdiction of the Court to entertain the petition.

Detailed Analysis:

1. Non-payment of Terminal Dues to Petitioners:
The petitioners, former employees of the respondent-company, alleged non-payment of their terminal dues despite statutory notice. One petitioner claimed Rs. 3,54,315 in unpaid salary, perks, and allowances, while the other claimed Rs. 4,29,252. Both petitioners highlighted assurances from the respondent's managing director to pay the dues, which were not fulfilled. The respondent denied liability, attributing it to a different legal entity, Interra Information Technologies Enabled Services (P.) Ltd. (IITESPL), which had merged with the respondent-company.

2. Legal Relationship between Petitioners and Respondent-Company:
The respondent-company argued that the petitioners were employed by IITESPL, not by the respondent. However, the Court noted that since IITESPL had merged with the respondent-company, the latter assumed all liabilities of the former, including the dues owed to the petitioners. The Court rejected the respondent's claim of no debtor-creditor relationship, emphasizing that the respondent must assume the liabilities of the transferor company.

3. Limitation Period for Claiming Dues:
The respondent raised the plea of limitation, arguing that the debt had become time-barred. The Court referred to an email dated 2-9-2001 from the managing director of IITESPL, acknowledging the debt and promising phased repayment. This acknowledgment reset the limitation period under Section 18 of the Limitation Act, making the petitions, filed on 31-8-2004, within the limitation period.

4. Maintainability of Winding-up Petition by an Employee:
The respondent contended that an employee is not a 'creditor' under Section 439 of the Companies Act, 1956, and thus cannot file a winding-up petition. The Court examined various judgments and concluded that unpaid salary constitutes a 'debt', and employees whose dues are unpaid can be treated as 'creditors'. Therefore, the petitions were maintainable under Section 439(1)(b) of the Act.

5. Definition and Scope of 'Debt' under the Companies Act:
The Court analyzed the definition of 'debt' from various legal sources, including Black's Law Dictionary and Supreme Court judgments. It concluded that non-payment of salary and terminal dues constitutes a 'debt', giving the petitioners the status of 'creditors'. The Court disagreed with the Madhya Pradesh High Court's distinction between 'debt' and 'remuneration', aligning instead with the Andhra Pradesh High Court's view that unpaid salary is a recoverable debt.

6. Jurisdiction of the Court to Entertain the Petition:
The Court held that it has the jurisdiction to entertain the winding-up petitions filed by the petitioners, as they were creditors of the respondent-company. The Court emphasized that even if the petitions are maintainable, it exercises discretionary jurisdiction and may refuse to entertain a winding-up petition based on the facts and circumstances of each case.

Conclusion:
The Court admitted the petition for hearing, appointed the Official Liquidator as the Provisional Liquidator to take charge of the company's assets and records, and provided a six-week period for the respondent-company to deposit the claimed amount. If the amount was not deposited, the petitioners were directed to proceed with the publication of citations, and the Official Liquidator would take necessary steps. The orders passed in one petition would also benefit the petitioner in the other case.