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TMI Blog1967 (7) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of India, be also transferred to and become the liabilities of the new company, Central Inland Water Transport Corporation Limited, and for other consequential reliefs. The company was incorporated in England on or about 10th July, 1914. The objects of the company were, inter alia , the conveyance of passengers, merchandise and goods and treasure in steamers, boats, barges or other vessels to and from such places in the East Indies or elsewhere as the company may, from time to time, determine. The company commenced the business of river transport between Calcutta and Assam. Since the year 1965, the Government of India in view of the importance of the business of the company, acquired by purchase various shares in the company. The Government of India came to possess 5,00,000 equity shares, of which 29,660 are fully paid up and 4,70,340 are partly paid up, to the extent of 15 shillings per share. The company owned a fleet of 59 steamers, 19 tugs, 16 launches, 108 flats and 38 barges. The company also employed a large number of staff and workmen both in West Bengal and Assam. It is also alleged in the petition that the company has been compelled to close down its main business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take all liabilities of the existing company in favour of the State Bank of India. The amount due to the Chartered Bank would be payable by the new company and the claim of the Chartered Bank would be reduced to Rs. 60 lakhs. The other creditors of the existing company, which comprised the unsecured creditors other than the State Bank of India, the Chartered Bank, the Government of India and the creditors referred to in paragraph (5) of the proposed scheme were to be paid Rs. 5,000 or, if the amount due to them was less than Rs. 5,000, then the full amount due upon the sanction of the scheme and the others would be paid Rs. 66-2/3 per cent, of the balance of their dues as appearing in the books of account of the company in instalments, viz ., 33-1/3 per cent, payable on 30th June, 1967, and the balance of 33-1/3 per cent, on or before 30th June, 1968. The new company would employ such of the workers and staff of the existing company as might be necessary and suitable for its business on such terms and conditions as it, in its discretion, thought fit. Upon approval of the scheme by the court, the existing company would be closed and upon payment to all the creditors the existing co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... staff would be on the basis of uninterrupted transfer of services to the new company provided that there would be no retrenchment till 31st December, 1959, of the workers and staff covered by the agreement dated 25th August, 1965, between the Rivers Steam Navigation Company Limited and the Inland Steam Navigation Workers' Union. The deponent also suggested that upon the approval of the scheme by the court the Rivers Steam Navigation Company Limited would be closed and upon payment of-all dues in full to all the employees the River Steam Navigation Co. Ltd. would be dissolved without winding up pursuant to an order to be obtained from this court. Thirdly, the deponent said in paragraph 18 of the affidavit that the court should sanction the proposed scheme after directing the alteration as indicated in the affidavit in which reference has been made and if the scheme was approved without alteration and amendments, hundreds of employees would be thrown to unendurable misfortune without any fault of theirs. The agreement dated 25th August, 1965, to which reference was made by the deponent in his affidavit, will appear at pages 109 to 112 of the paper book. The terms of settlement wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting as it was never intended to enter into any compromise or arrangement with them. On these facts broadly stated, counsel for the appellants raised four contentions, first, that the workers are creditors and if a workman is a creditor and he is not being represented at the meeting, it contravenes the provisions of section 391 of the Companies Act and therefore the scheme is bad. Secondly, the agreement or the settlement dated 25th August, 1965, to which reference has been made was arrived at between the workmen on the one hand and the company on the other and such an agreement was binding not only on the Rivers Steam Navigation Company Limited but also on the new company to which rights and liabilities of the Rivers Steam Navigation Company Limited were transferred, and the learned judge did not recognise the agreement or settlement in the scheme. Thirdly, the schemes contemplated in section 391 of the Companies Act do not apply to any scheme between two companies, both of which are Government companies. Fourthly, the provisions contained in sections 391 and 394 of the Companies Act do not apply in the present case, as this was neither a case of amalgamation nor of reconstru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be made. Counsel for the appellants, therefore, contended that there was sufficient evidence to hold that the workmen were creditors and yet they were not allowed to participate at the meeting and notice was not given to them and on 30th January, 1967, when the matter was mentioned on behalf of the workmen and they wanted to appear by proxies they were not granted any proxy. It was also said by counsel for the appellants that the claim of the workers would appear to be of large magnitude and would approximately come to Rs. 75 lakhs. It should be stated here that this value does not appear in the affidavit evidence and it was made as a submission by counsel for the appellants. It will appear from the judgment, particularly at page 223, that the labour in the present case was not opposing the scheme at all. Counsel for the company placed considerable reliance on that observation in the judgment and rightly contended that the workers did not raise the contention in the trial court that the scheme was bad because no notice was given or that they were creditors who should have been allowed to participate at the meeting and, on the contrary, the workers wanted modification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l employ such of the workers and staff of the existing company as are considered by it suitable and necessary for its business on appropriate terms and conditions to be decided by the new company. The employees of the existing company who are not absorbed by the new company will be paid by the existing company compensation due and payable to them under the law. If, as a result of the growth of business, the new company requires additional hands, the employees of the existing company who are not absorbed now, will, if they are willing and otherwise found suitable, be considered preferentially and upon the Government through their advocate, Mr. D. K. Sen, giving in court the assurance as follows : The Government of India agrees to pay the amount due to the secured and unsecured creditors, as indicated in the scheme proposed in the petition by the Rivers Steam Navigation Company Limited. The Government of India shall provide necessary funds to the new Central Inland Water Transport Corporation Limited to pay the amount provided in the scheme for settlement to the Chartered Bank of India." This assurance was reiterated at the hearing of the appeal and it is hoped that the assuran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the scheme should be modified by having a clause that the new company would employ all workers and staff of the existing company in the Assam establishment on the basis of uninterrupted transfer of service to the new company. Paragraph 7 of the scheme sanctioned by the court appearing at page 270 of the paper book and which has been set out above shows that whatever protection and modification the workers wanted was given and therefore counsel for the respondent contended that the labour, namely, the workers in the present case were not opposing the scheme and the observation of the learned judge at page 223 of the paper book to the effect is a fact which has been accepted and there is no denial of that fact in the grounds of appeal. This contention of counsel for the respondent is, in my view, sound and correct. In view of the fact that the scheme did not touch or affect any salary or any other due to any workman and it should be stated here that it was not the contention of counsel for the appellants that the scheme had any such effect and also in view of the fact that the workers did not assert any claim with regard to any particular sum of money for any particular work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the conciliation officer. Reference may next be made to section 18 of the Industrial Disputes Act which indicates that settlement arrived at by agreement between the employer and workmen in the course of conciliation proceeding shall be binding on the parties to the industrial dispute; all other parties summoned to appear in the proceedings as parties to the dispute, the employer, his heirs, successors or assigns in respect of the establishment to which the dispute relates and workmen would include all persons who were employed in the establishment to which the dispute related on the date of the dispute and persons who subsequently became employed in that establishment or part. The decision of the Supreme Court in Ramnagar Cane and Sugar Co. Ltd. v. Jatin Chakravorty [1960] 19 FJR 99; AIR 1360 SC 1012 , indicates that the whole policy of section 18 of the Industrial Disputes Act appears to give extended operation to the settlement arrived at in course of conciliation proceeding and that is the object with which the four categories of persons bound by such settlement were specified in section 18 of the Industrial Disputes Act. Counsel for the appellant placed reliance on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect notwithstanding anything inconsistent therewith contained in any other law and this was not a case where anything would be found to be inconsistent with any law. Counsel for the appellants, on the other hand, put in the forefront not only the agreement dated 25th August, 1965, but also the observations and finding in the judgment at page 254 of the paper book that the agreement was bona fide extinguished by circumstances beyond its control. The learned judge discussed the agreement and settlement at pages 252 to 254 of the paper book and observed that, as far as clerks of the Ghat establishment and the Assam clerical and subordinate staff of the company were concerned, the Rivers Steam Navigation Company Limited agreed to avoid retrenchment of the Ghat clerical staff and in case of Assam staff there was no agreement to avoid retrenchment. At page 253 of the paper book it was observed in the judgment as follows : " It is not a question of proposed retrenchment of the staff of the Ghat establishment but in effect to really close down the company as a whole and to transfer its assets and liabilities to a new company set up by the Government of India." The further observation at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admissible and that such moneys shall be provided by the Government of India to the existing transferor company who will pay these dues. Counsel for the appellants rested the case of the appellants on clause 7( c ) of the scheme and, in particular, the agreement dated 25th August, 1965, and contended that, if any worker or workman could not be taken over,' the worker or workman would raise his claim under the agreement dated 25th August, 1965. If there is a finding that there has been a closure of the company and if there is a finding that the agreement has become extinguished, the enforceability of the agreement is imperilled for ever and the worker or workman cannot set up the agreement any further. It was not within the scope of the scheme to find out whether, first, there was a closure of the company within the meaning of the Industrial Disputes Act and, secondly, whether the agreement has become extinguished so as to close the door of the workers for ever against enforcing that agreement. The claim of the workers under the Industrial Disputes Act based on the agreement dated 25th August, 1965, was not within the jurisdiction and province of the application for sanction of sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants submitted that the scheme should be modified to make it clear that the workers or workmen would have the liberty to apply in the event of any claim being made under the agreement. I am of opinion that no such liberty should be given save what is in the scheme. The agreement will have to be enforced in properly constituted proceedings. I am of opinion that, if any claim be made in the proper jurisdiction, it will be a matter for enforcement of that claim in properly constituted proceeding. It is needless to say that, unless there is adjudication, there cannot be any enforcement of the claim and such adjudication has to be made in a proper forum. As far as the scheme is concerned, sub-clause ( c ) of clause 7, which was modified by the learned judge, is of wide amplitude that those of the employees who cannot be taken over shall be paid all legitimate and legal compensations payable to them under the Industrial Disputes Act or otherwise legally admissible. The third contention on behalf of the appellant was that the provisions contained in section 391 of the Companies Act were not available to a Government company. Counsel for the appellants submitted that the veil of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies Act is to denude the provisions of the Companies Act of their content and character and to deprive the Government company of the rights under the statute. The language of the provisions does not have either any restrictive operation as far as Government companies are concerned or fetter the jurisdiction of the court in relation to Government companies. Arguments were advanced at the Bar about piercing the veil of the company and reference was made to the Daimler Company Ltd. v. Continental Tyre Rubber Co. Ltd. [1916] 2 AC 307 , Tunstall v. Steigmann [1963] 33Comp. Cas. 1057; [1964] 2 SCA 201 (SC) , and the decision of the Supreme Court in State Trading Corporation of India v. ITO [1962] 2 QB 593 and another decision in Andhra Pradesh State Road Transport Corporation v. Income-tax Officer, B-1 B-Ward, Hyderabad [1964] 52 ITR 524 (SC) . It will appear from those decisions that the court when occasion demanded pierced the veil to find out as to what the constitution of the company is. In Andhra Pradesh State Road Transport Corporation's case ( supra ), it was found that, though the company was owned by the State, the Corporation had a separate person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a scheme for reconstruction or the amalgamation of companies. Reliance was placed by counsel for the appellants on the decision of the Supreme Court in Anakapalle Co-operative Agricultural and Industrial Society Ltd. v. Workmen [1963] 24 FJR 101; AIR 1963 SC 1489 in support of the contention that the court would have to be satisfied before the court exercises its powers of sanctioning a scheme. It will appear from the petition that it was an application under sections 391 and 394 of the Companies Act. There is no particular meaning in the word "reconstruction" or in the word "amalgamation". It has to be found out from the scheme read as a whole whether it is a case of reconstruction or whether it is a case of amalgamation. In the present case, the entire affidavit evidence as also the way the petition was presented and the manner in which the scheme has been sanctioned prove beyond any measure of doubt that it is a case of reconstruction. In case of amalgamation, all the rights and liabilities are amalgamated and the transferee company becomes vested with all such rights and liabilities. In the present case the scheme to which reference has been made shows that the Rivers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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