1951 (1) TMI 19 - HC - Companies Law

Winding up - Suits stayed on winding-up order, Debts of all descriptions to be admitted to proof and Preferential payments

Issues Involved:
1. Validity of the closure of the Mills and its classification as a lock-out.
2. Status of the workers after the debenture trustees took possession.
3. Applicability of Section 171 of the Indian Companies Act.
4. Authority to question the award of the industrial tribunal.
5. Priority of workers' wages under Section 230 of the Indian Companies Act.

Detailed Analysis:

1. Validity of the closure of the Mills and its classification as a lock-out:
The industrial tribunal held that the closure of the Mills from 24th May, 1947, was unwarranted and amounted to a lock-out, which must be deemed to be an illegal lock-out. This conclusion was based on the pendency of a dispute between the workers and the management of the Mills, which had been referred to the tribunal by the Government. The tribunal's award was declared binding by the Government under section 15, sub-section (2) of the Industrial Disputes Act on 5th September, 1947.

2. Status of the workers after the debenture trustees took possession:
The appellant contended that from 14th February, 1947, when the debenture trustees took possession of the mortgaged premises and began to carry on the business, there was a change in personality, and the workers could no longer be deemed to be the workers of the company. However, this contention was opposed to the actual facts, as the trustees carried on the business of the company only in pursuance of an agreement to work the Mills "at the risk and on account of the company." The court held that even if the debenture trustees had exercised their right to carry on the business, the company would not cease to exist as a legal entity, and the business would continue to be the business of the company.

3. Applicability of Section 171 of the Indian Companies Act:
The appellant argued that the declaration by the Government under section 15 (2) of the Industrial Disputes Act required leave of the court under section 171 of the Indian Companies Act. The court found no substance in this contention, stating that the declaration by the Government was not a "legal proceeding" but a mere mechanical administrative act. The adjudication by the tribunal was the final determination of the dispute, and the Government's declaration was automatic and mandatory.

4. Authority to question the award of the industrial tribunal:
The appellant sought to attack the award on its merits, but the court held that section 15, sub-section (4) of the Industrial Disputes Act expressly states that an award declared to be binding shall not be called in question in any manner. The court emphasized that the Official Liquidator cannot examine the correctness of the adjudication of the industrial tribunal in the absence of fraud or collusion. The court also noted that there was no miscarriage of justice in the tribunal's award.

5. Priority of workers' wages under Section 230 of the Indian Companies Act:
The learned Judge allowed priority for the workers' wages for two months prior to the winding up order under section 230 (1)(c) of the Indian Companies Act. The appellant argued that the workmen did not render any service during that period as the Mills had been closed. The court held that the right of priority is not lost in cases of an illegal lock-out, illness, or the employer's inability to pay salary, as established in English law. Therefore, the court agreed with the learned Judge in allowing priority for the workers' wages.

Conclusion:
The appeal was dismissed with costs, and the court upheld the award of the industrial tribunal, the status of the workers, the applicability of Section 171, and the priority of workers' wages under Section 230 of the Indian Companies Act.

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