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TMI Blog1951 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... nd all the machinery, plants, fittings, etc., attached to the Mills were mortgaged to secure payment of the amounts due to the debenture holders. There were other provisions in the debenture deed which conferred rights on the debenture holders and the trustees for the debenture holders to take possession of the Mills on default of payment of interest and to work the Mills, if they chose, or to bring the mortgaged premises to sale. It appears that in pursuance of such provisions, the debenture trustees under the trust deed took possession of the Mills sometime in 1940 and were running the Mills till October, 1945, when the Mills were handed back to the company. It is common ground that again the debenture trustees on behalf of the debenture holders under the first deed took possession of the mortgaged premises on 14th February, 1947, as there were large arrears of interest. Thereafter, there was an agreement between the directors of the company and the debenture trustees which was confirmed at a meeting of the board of directors of the company held on 20th February, 1947. As it was necessary in the interests of the company that the factory should remain working, and as at the reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 26th May, plus extra wages for 13 days in lieu of notice and shift workers would be paid for Sunday, the 25th May, in addition, and that members of the staff would be paid their salaries up to and including Monday, the 26th May, plus one month's salary as notice pay. Certain members of the staff and workmen specified in a separate list were to continue to work. In accordance with this notice, the gates of the Mills were closed on that day. On behalf of the workers a telegram was despatched to the Honourable the Minister for Labour, Government of Madras, praying for Government's intervention in view of the sudden closure of the Mills. On 24th June, 1947, the Government passed an order under section 10(1) (c) of the Industrial Disputes Act, 1947, referring the industrial dispute, which had arisen between the workers and the management of the Andhra Paper Mills Co. Ltd., in regard to the closure of the Mills, to an industrial tribunal. The District and Sessions Judge. East Godavari, was constituted the tribunal to adjudicate on this dispute. On the next day, the Government passed an order (Ex P-4) under section 10 (3) of the Industrial Disputes Act, 1947. prohibiting the continuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liquidator called on the workers to submit their claims and when their claims were submitted, he passed an order wholly rejecting them. An application was then filed by the Union on behalf of the workers for a direction to the liquidator to admit the claims of the workers to wages during the period above-mentioned and to give them priority over the other debts of the company, under section 230 of the Indian Companies Act. The application was heard by Panchapagesa Sastry, J., who allowed the application to this extent, viz., that he held that the workers were entitled to be paid the amount of their salary as claimed in the schedule, after deduction of the amounts admitted to have been received by them for any portion of the period from 24th May, 1947, and that the workers would be entitled to a priority in respect of two months salary prior to the winding up order but for the remainder they would share rateably with the other creditors. The Official Liquidator, on behalf of the company in liquidation, has appealed against this order. The contention which was most strongly pressed before us on behalf of the appellant by Mr. K. Narasimha Ayyar was that on and from 14th Februar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received or might have received, or ought to have received while he continued in such possession." These are two answers to this contention. The first is that the contention is opposed to the actual facts. Mr. Narasimha Ayyar was unable to fit in what actually happened with the scheme of the provisions in the debenture deed. As already mentioned, the resolutions of both the board of directors of the company as well as of the debenture holders make it abundantly clear that the trustees, though they entered upon the mortgaged premises in exercise of their rights under the deed, carried on the business of the company only in pursuance of an agreement between them and the company to work the Mills "at the risk and on account of the company." The only way in which Mr. Narasimha Ayyar attempted to get over this difficulty was by asking us to treat this agreement as a superfluity. We are unable to agree with him. The second answer is that even if the debenture trustees, on behalf of the debenture holders, had exercised their right to carry on the business of the company, the company would not cease to exist as a legal entity and the business would continue to be the business of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the majority of the Court of Appeal that the dissolution of the partnership operated as a wrongful dismissal of the plaintiff but that he was only entitled to nominal damages. This case brings out the essential difference between a partnership and a company. By the retirement of two of the partners, the original partnership as such came to an end. In the case of a company, any change in the management, would not put an end to the company as such. This contention of Mr. Narasimha Ayyar cannot therefore prevail. The next contention which was most seriously pressed was based on section 171 of the Indian Companies Act, which runs thus: "When a winding up order has been made, or a provisional liquidator has been appointed, no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the court may impose." The reference by the Government and the award by the industrial tribunal were long before the date of the appointment of a provisional liquidator and the winding up order. So Mr. Narasimha Ayyar's contention had to be confined to the only thing which happened after the order appointing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 13 this award was a lifeless document and had no sanction behind it and therefore it could not have been contemplated that it would be appealable even by special leave. In my opinion, this contention-is unsound. The provisions of clause (2) of section 15 leave no discretion in the Government either to affirm, modify or reject the award. It is bound to declare it binding. It has no option in the matter. In such a situation it is the determination by the tribunal that matters. Without that determination Government cannot function, It does not possess the power either to adjudicate the dispute or to alter it any manner whatsoever. That power vests in the tribunal alone. The rights of the parties are really affected by the adjudication contained in the award, not by the Government's declaration which is automatic." Apart from this legal position we are of opinion that section 171 of the Indian Companies Act would have no application to enquiries, investigations, and orders made either by Government or statutory bodies in exercise of statutory powers. In In re Pontypridd C. Tramways Co. the corresponding provision 'in the English Act of 1862 was held not to apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary for two months prior to the date of the winding up order. In allowing this priority the learned Judge only purported to apply section 230 (1)( c ) of the Indian Companies Act, under which "all wages of any labourer or workmen, not exceeding five hundred rupees for each, whether payable for time or piecework, in respect of services rendered to the company" within the two months next before the date of the winding up order, shall be paid in priority to all other debts. The argument on behalf of the Liquidator was that the workmen actually did not render any service to the company during that period as the Mills had been closed from 24th May, 1947. No direct decision was cited to us on this point; but it appears to have been held in England that when a workman is absent from the business on account of illness and with the concurrence of the employer, or when an employee is compelled to leave the service on account of his master's inability to pay his salary, the right of priority is not lost. See Re Green : Ex parte Sanders and Re Glosson : Ex parte Harries. Vide also Halsbury's Laws of England, Volume II, page 290, note ( i ). The same principle must apply to the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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