2008 (9) TMI 564 - HC - Companies Law

Winding up - whether the arrears of salary is debt or not and on default of payment of arrears, the company is liable to be wound up or not? Held that - Before passing any order for winding up of the company, have to arrive at conclusion that the petitioner is entitled for the salary for the period he claimed and the same, has, become due, for which have to determine the several disputed facts which can be determined only after going through the evidences adduced by the parties. Therefore, the civil court is the best court to determine the factual aspects involved in the matter for payment of salary to the petitioner and the petitioner can resort the claim for payment of salary under the term debt by filing the civil suit before the civil court. Thus dismiss the company petition.

Issues Involved:
1. Maintainability of the company petition for winding up under section 433(e) of the Companies Act, 1956, based on non-payment of salary.
2. Determination of whether arrears of salary constitute a "debt" under section 433(e) of the Companies Act, 1956.
3. The locus standi of employees to file a winding-up petition.
4. The factual determination of the petitioner's entitlement to salary and increments.

Issue-wise Detailed Analysis:

1. Maintainability of the company petition for winding up under section 433(e) of the Companies Act, 1956, based on non-payment of salary:
The petitioner filed a company petition for winding up under section 433(e) of the Companies Act, 1956, due to non-payment of salary. The opposite party contested the maintainability, arguing that arrears of salary do not constitute a debt under section 433(e). The court examined relevant provisions, including sections 433 and 439, which outline the circumstances and entities entitled to file a winding-up petition. The court noted that an employee, not being a creditor, has no right to move a winding-up application solely for salary arrears.

2. Determination of whether arrears of salary constitute a "debt" under section 433(e) of the Companies Act, 1956:
The court analyzed whether arrears of salary qualify as a "debt" under section 433(e). The opposite party cited precedents, including Pawan Kumar Khullar v. Kaushal Leather Board Ltd., which differentiated between debt and salary, and National Textile Workers Union v. P.R. Ramakrishnan, which denied workers' right to intervene in winding-up petitions. The court also considered section 529A, which prioritizes workmen's dues in winding-up but does not classify them as debt. Contrarily, the petitioner referenced judgments like M. Suryanarayana v. Stiles India Ltd., where arrears of salary were deemed debt under section 433(e).

3. The locus standi of employees to file a winding-up petition:
The court reviewed the locus standi of employees in winding-up petitions. The Supreme Court in National Textile Workers Union v. P.R. Ramakrishnan held that workers do not have the right to file or intervene in winding-up petitions unless they are creditors. The Delhi High Court in Argha Sen v. Interra Information Technologies (India) (P.) Ltd. supported that employees could file winding-up petitions as creditors if their dues remain unpaid, aligning with the definition of debt provided by the Supreme Court in Kesoram Industries & Cotton Mills Ltd.

4. The factual determination of the petitioner's entitlement to salary and increments:
The court examined the petitioner's claim for unpaid salary and increments. The petitioner alleged non-payment from February 2003 and demanded increments from 1995. The opposite party contended the petitioner had resigned in 2001 and was not entitled to salary post-January 2003. The court found conflicting facts regarding the petitioner's employment status and entitlement to increments, noting that these could only be resolved through detailed evidence examination.

Conclusion:
The court concluded that while employees could file winding-up petitions as creditors for unpaid dues, the determination of the petitioner's entitlement to salary required factual examination best suited for a civil court. Thus, the company petition was dismissed, allowing the petitioner to pursue a civil suit for salary recovery.

Order:
The company petition is dismissed. No orders as to costs.

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