2015 (10) TMI 1771 - HC - Companies Law

Winding up Petition of unpaid dues of salary - Asset Management Business - Whether unpaid wages/salary of workman/employee can be covered within the meaning of debts under Section 433(e) of the Companies Act, 1956 and view taken in the matter of Pawan Kumar Khullar Vs. Kaushal Leather Board Limited in this regard is correct? Petitioner contends that Respondent paid no heed to discharge its debts payable towards outstanding salary and emoluments for services rendered Respondent contends that dues towards salary does not become debt under Section 433(e) and employee of cannot pursue claim in that behalf as Creditor by filing a Petition under Sections 433 and 434. Held That - No provision of any statute much less of the Companies Act has been brought to notice which excludes the dues to be received by employee Court disagrees with opinion made in the case of Pawan Kumar Khullar Vs. Kaushal Leather Board Limited 1995 (3) TMI 383 - HIGH COURT OF MADHYA PRADESH as it is not possible to countenance that unpaid salary is not a debt Section 529A does not state that the amount receivable by employees, who may not be workmen as such, is not a debt or that they are excluded from the term creditors Employee can locus to file Company Petition in respect of unpaid wages and emoluments, same as creditor of Company and opinion of High Court in case of Pawan Kumar Khullar (supra), is overturned Decided in favour of Petitioner.

Summary

Issues Involved:
1. Whether unpaid wages/salary of a workman/employee can be covered within the meaning of debts under Section 433(e) of the Companies Act, 1956.
2. The locus of the petitioner to file a Company Petition for winding up against the respondent-Company in respect of unpaid salary, wages, and emoluments.

Issue-wise Detailed Analysis:

1. Unpaid Wages/Salary as Debt under Section 433(e):

The petitioner filed a Company Petition for winding up the respondent-Company, asserting non-payment of salary and emoluments. The core question was whether such unpaid salary constitutes a "debt" under Section 433(e) of the Companies Act, 1956. The petitioner argued that unpaid salary is a debt, supported by various High Court decisions and legal definitions. The respondent contended otherwise, relying on the Supreme Court's decision in National Textile Workers' Union and the Bombay High Court's decision in Mumbai Labour Union, which suggested that workers are not creditors under Section 439.

The judgment clarified that the term "debt" is not defined in the Act but is understood as a sum of money due from one person to another, encompassing obligations to pay ascertainable sums. The Supreme Court in Kesoram Industries and Cotton Mills Ltd. elucidated that a debt is a present obligation to pay an ascertainable sum, whether payable presently or in the future.

The Andhra Pradesh High Court in Capt. B.S. Demogray and M. Suryanarayana, and the Delhi High Court in Argha Sen, held that unpaid salary is indeed a debt. The judgment agreed with these views, noting that unpaid salary, wages, and emoluments are debts payable by the Company, and the employee is a creditor.

2. Locus of the Petitioner to File a Company Petition:

The respondent challenged the petitioner's locus to file a Company Petition, arguing that salary, wages, and emoluments do not constitute a debt, and thus, the petitioner cannot be a creditor under Section 439. The petitioner countered, citing decisions that unpaid salary is a debt, making the employee a creditor.

The judgment emphasized that any creditor, including employees owed unpaid wages, can invoke the jurisdiction of the Company Court for winding up under Section 433(e). The term "creditor" includes those entitled to receive money due to them, and no statute excludes employees' dues from this definition.

The Court disagreed with the Single Judge's opinion in Pawan Kumar Khullar, which differentiated between debt and salary, holding that unpaid salary is a debt. The judgment reinforced this view with references to legal definitions and precedents, concluding that employees with unpaid wages are creditors.

The Court also addressed the respondent's reliance on the Supreme Court's decision in National Textile Workers' Union, clarifying that the decision does not preclude employees from being creditors. The Delhi High Court's analysis in Argha Sen was cited, which noted that workers have the right to be heard and can maintain petitions as creditors.

The judgment concluded that the petitioner, as a former employee owed unpaid salary, has the locus to file a Company Petition for winding up under Sections 433(e) and 434. The opinion of the learned Company Judge in Pawan Kumar Khullar was overturned.

Conclusion:

The judgment held that unpaid wages/salary of a workman/employee are covered within the meaning of debts under Section 433(e) of the Companies Act, 1956. The employee has the locus to file a Company Petition for winding up against the respondent-Company as a creditor. The judgment did not express any opinion on the merits of the claim or the discretion of the Company Judge to entertain the petition, and it did not address the locus of Trade Unions to file such petitions. The matter was directed to be placed before the Company Judge for further consideration.