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TMI Blog2005 (9) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent was not in a position to pay up his salary dues, etc., and, therefore, requested the petitioner to submit his resignation without insisting for full and final payment assuring that salary and dues, etc., would be paid as soon as funds were available. On this assurance the petitioner submitted his resignation on 13-8-2001. Thereafter the managing director of the company, vide letter dated 2-9-2001, reiterated his assurance to pay the dues. However, the needful was not done. The petitioner, in these circumstances, sent statutory notice dated 28-7-2004 calling upon the company to pay a sum of Rs. 3,54,315 on account of unpaid salary, perks and allowances. The break-up of this amount is as under : Rs. Gross Salary due June to August 2001 3,55,800 Less : Deductions (PF and profession tax) 16,200 3,39,600 Allowances due : - LTA 15,737 Less : Leave encashment 3,55,337 - 59,772 2,95,565 Add : Unpaid reimbursement of expenses 58,750 Total 3,54,315 Interest of Rs. 2,55,107 was also payable. The company in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 18-8-2004 denying the liability. In reply to the petition the defence raised by the respondent-company is identical to the defence raised in earlier petition and note whereof has been taken above. 5. It may be noted that the petitioners have themselves admitted in their respective petitions that they were employed by IITESPL. They have also stated that pursuant to a scheme of amalgamation sanctioned by this Court vide orders dated 25-8-2003 the said company was taken over by the respondent-company. Therefore, on this basis it is stated that the liability of the transferor-company with which the petitioners were employed becomes that of the transferee-company, namely, the respondent- company and the petitioner would be creditors of the respondent-com- pany as far as payment of their salary and perks, etc., is concerned which remained unpaid. This submission of the petitioners is well-founded. Merely because the company with which the petitioners were employed has been amalgamated with the respondent-company, the respondent-company cannot shy away from assuming the liability of paying the creditors of the transferor-company. Therefore, the submission of the respondent that li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y at the instance of a creditor. In support of this plea he relied upon the following judgments : ( i ) National Textile Workers Union v. P.R. Ramakrishnan AIR 1983 SC 75, ( ii ) Mumbai Labour Union v. Indo French Times Industries Ltd. [2001] 45 CLA 412 1 (Bom.), and ( iii ) Pawan Kumar Khullar v. Kaushal Leather Board Ltd. AIR 1996 MP 85. He also submitted that it was for the petitioner to prove that he was a creditor and the Court could refuse to pass winding-up order in the absence of any such petition. Reliance was placed on the judgment of the Calcutta High Court, on this proposition, in the case of Ram Kumar Agarwalla v. Buxar Oil Rice Mills Ltd. AIR 1960 Cal. 764. He also submitted that claim by an employee could not be treated as debt as held in B.R. Somashekarappa v. Vignam Industries Ltd. [1990] 68 Comp. Cas. 264 (Kar.). 10. Learned counsel for the respondent, on the other hand, submitted that under section 433( e ) of the Act a company could be wound up by this Court if it is established that such a company is unable to pay its debts. Deeming provision of inability to pay the debt was attracted if the company neglected to pay the debt for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in various judgments, is reproduced below : Ordinarily, the word "debt" imports a sum of money arising upon a contract express or implied. In its more general sense, it is defined to be that which is due from one person to another, whether money, goods or services : that which one person to another, whether money, goods or services : that which one person is bound to pay or perform to another - Garsson v. American Diesel Engine Corp. 39 NE 2D 566, 569, 310 Mass 618. . . . The idea of a debt in the constitutional sense of imposing limitation on indebtedness, is that an obligation has arisen out of contract, express or implied, which entitles the creditor unconditionally to receive from the debtor a sum of money, which the debtor is under a legal, equitable, or moral duty to pay without regard to any future contingency - State Office Bldg. Commission v. Trujillo , 120 P.2d 434, 442, 46 NM 29. . . . The word "debt" has several recognised meanings. Any financial obligation is a debt in a broad and general sense; but, where the term is used technically and restrictively, it implies an ascertained amount, and sometimes, as well, a foundation in contract. The same disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uneration paid to a person or employee in lieu of services rendered by him/her whereas debt is not remuneration. Debt is something which is borrowed by a person on settled terms and conditions and settled rate of interest and can be re-settled between the parties." (p. 86) This judgment, obviously, was relied by the Learned Counsel for the respondent to contend that the petitioners in the present case could not say that the outstanding salary payable to them was debt. 18. Per contra learned counsel for the petitioner relied upon the judgment of Andhra Pradesh High Court in Capt. B.S. Demogray v. VIF Airways Ltd. [1998] 94 Comp. Cas. 291 1 . In this case Andhra Pradesh High Court took note of the aforesaid judgment of Madhya Pradesh High Court and dissented therefrom while holding that the outstanding salary would also constitute a debt. For distinction of debt judgment of the Supreme Court in the case of Kesoram Industries Cotton Mills Ltd. ( supra ) was relied upon and it was held that the unpaid salary of an employee is liable to be recovered from the employer because the employer is obliged to pay the employee s salary for the services rendered by the employee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer a petition for winding-up of a company. The right to apply for winding-up a company being a creature of statute, none other than those on whom the right to present a winding-up petition is conferred by the statute can make an application for winding-up a company and no such right having been conferred on the workers, they cannot prefer a winding-up petition against a company. . . ." (p. 84) 21. In first blush, when the aforesaid observations are, read in isolation the impression which would be gathered is that workers have no right to file the winding-up petition as they do not come within the scope of section 439 of the Act. However, when these observations are, read in totality and the context in which they were made in the said judgment of the Hon ble Supreme Court, their import would be clearly discernible. Therefore, we shall have to first understand the issue involved in this case which the Apex Court was called upon to decide and the circumstances which led the court to make those observations. At the outset it may be noted that workers had not filed the winding-up petition. Winding-up petition was filed against the company by one group of shareholders as serious di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies had right to maintain a winding-up petition and, therefore, workers had no right to intervene in a winding-up petition when no such right was spelt out in their favour in the Companies Act. Opening portion of para 7 takes note of this argument and immediately thereafter the Court has made the observation quoted above stating that section 439 does not describe workers as a category which can file a winding-up petition. After making these observations the Court answered that "but for this exclusion of the workers from the right to present a winding-up petition, it does not follow as a necessary consequence that the workers have not right to appear and be heard in a winding-up petition filed by one or more of the persons specified in section 439 of the Act.". 22. Once we take note of this background fact situation, it is not difficult to spell out the true intention behind the afore-quoted observation. Workers in the said case wanted to oppose the winding-up petition. The petitioners, who had filed the winding-up petition, disputed the workers right to participate in these proceedings. In support of their contention the petitioner relied upon section 439 of the Act to conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding-up as it exercises discretionary jurisdiction. The Court would be loathe to exercise such a jurisdiction at the instance of an existing employee on worker on the ground that the worker should not make an attempt to bury the employer , the expression used by the Bombay High Court. It is for this reason that in the facts of that case I have no quarrel with the outcome of the petition wherein the Bombay High Court refused to entertain the petition filed by a labour union claiming to represent the class of unpaid employees collectively as creditors of the company. Additional ground was that an union cannot become the creditor as the creditor would be employees in their individual capacity. 24. Normally, therefore, at the instance of existing employee/worker the Court may not pass winding-up order. Again this may not be a general rule and there may be instances justifying the exercise of this discretion for example, in a case where the factory/establishment is closed with no chance of revival and the workers whose dues remain unpaid and they have not been terminated either, those workers may have right to approach the court for winding-up as that would not be a case where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, petition was filed against a company of architects which had engaged a company for providing elevators of their client s company s building and the building owner had not paid the amount for the supplies made. It was held that there was no contract with the architects and the petition was dismissed. In the latter case, supply was made to sister concern of the company and no material could be produced on record to establish that the company was responsible for payment thereof. In the present case, the respondent- company is neither in the category of an agent of IITESPL nor its sister concern but as successor of IITESPL has taken over all its liabilities. 27. Insofar as liability to pay the amount is concerned, there is categorical admission and acknowledgement of debt in e-mail dated 2-9-2001 is not by the managing director of IITESPL. Thus, the respondent cannot contend that the petitioners have failed to prove that they are the creditors or have failed to prove the determined debt . Once it is held that liability to make the payment exists, which is also crystallised, argument of the respondent alleging that the petition is mala fide and has been filed to exert pressu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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