TMI Blog1990 (9) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 shares. On June 17, 1980 the name of the company was changed to that which it presently bears, namely, the Bombay Metropolitan Transport Corporation Ltd. 3. The company had losses and labour troubles between 1980-1981 and 1983-1984. In February 1984 its fleet of buses was immobilised and it had no liquid funds to maintain them. On February 24, 1984 a meeting was held with the Chief Minister of Maharashtra and it was decided that the company should close down its services and that these should be taken over by the Maharashtra State Road Transport Corporation. Accordingly, on March 1, 1984 a notice was issued of the suspension of the company's operations with effect from March 3, 1984. On March 18, 1984 a lock-out was declared. 4. On March 27, 1984 the company made an application to the State Government under the provisions of Section 25-O of the Industrial Disputes Act seeking permission to close down its undertaking with affect from July 1, 1984. The permission was granted on May 24, 1984. Appeals against the order granting permission were filed by the workmen of the company and the trade unions representing them before the Industrial Tribunal, Bombay. By its judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment and order which is under appeal. 9. This appeal was filed on June 19, 1987. The Division Bench before which it came up for admission directed the State Government to file an affidavit explaining its stand, as it had earlier refused permission for closure. The affidavit was made on behalf of the State Government on July 15, 1987. It stated that, having regard to the insolvent condition of the company, the deteriorated condition of its buses, the dispersal of its labour force and the induction of the MSRTC and BEST in New Bombay, it had no plans to lend financial or other assistance to the company so as to revive it. On July 24, 1987 the affidavit was taken on record, the appeal was admitted, and the State Government was directed to be made a party thereto. 10. By an order made earlier, the Maharashtra General Kamgar Union (respondent No. 5) was also directed to be made a party to the appeal. 11. The company then took out a Notice of Motion in the appeal (being Notice of Motion No. 2330 of 1987) and sought the appointment of the Official Liquidator as the Provisional Liquidator of the company. On November 2, 1987 an order was made accordingly. 12. On July 5, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under the provisions of Section 25-O before or after a winding-up order is passed there would seen to be a subordination of the order of the High Court to the order of the appropriate Government or to make the operation of the former conditional upon the latter. 14. It is our view, having heard Mr. Chinoy for the company, Mr. Rana for the Attorney-General, on notice, and Mr. Ganguli for the respondent 5 that, as urged by Mr. Chinoy and Mr. Rana, harmoniously constructed, there is no conflict between the provisions of the two statutes and that they operate in distinct and separate fields. 15. Under Section 433 of the said Act a company may be wound up by the Court in the circumstances therein stated. These include (a) if the company has by special resolution resolved that it be wound up by the Court, (e) if the company is unable to pay its debt and (f) if the Court is of opinion that it is just and equitable that it should be wound up. By reason of Clause (a) of sub-section (1) of Section 434 a company shall be deemed to be unable to pay its debts if it is proved to the satisfaction of the Court that it is unable to do so. Section 445 deals with the consequences of a winding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge of the officers and employees of the company. The services of the employees, therefore, come to an end by operation of law. 19. It is true, as Mr. Ganguli pointed out, that the Liquidator is empowered to carry on the business of the company, but this is only, as Section 457(1)(b) states, so far as may be necessary for the beneficial winding up of the company. If it is found by the Liquidator and by the High Court under whose supervision he functions that to carry on the business would be beneficial to the winding up of the company, then the Liquidator may be authorised to carry on the business for this purposed and until it is achieved. Such carrying on of the business of the company is subsequent to the order of winding up and subject to it. Even in such circumstances, there would be no question of permission under Section 25-O being required to close down. 20. Mr. Ganguli urged that the provisions of Section 445(3) were unconstitutional. We cannot countenance this argument in a winding-up petition. 21. The company made aggregate losses of - ₹ 57,22,858/- in the year 1980-81, ₹ 82,81,719/- in the year 1981-1982, ₹ 1,21,88,336/- in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavit made on July 15, 1987 on behalf of the State Government pursuant to the order of the Appeal Court, it was stated : .... considering its insolvent financial state, the deteriorated condition of its fleet of buses having suffered exposure to the elements of nature since February 1984, the dispersal of its labour force and the induction of the Maharashtra State Road Transport Corporation and the Bombay Electric Supply and Transport Undertaking to operate its bus services in New Bombay, the State Government does not consider it expedient to revive the Appellant-Company. I repeat and reiterate that the State Government has no plans to revive the Appellant Company. 5. I say and submit respectfully in conclusion in reply to the specific query of the Hon'ble High Court that the State Government has no plans to lend financial or other assistance to revive the Appellant Company ... 25. It is patent that, in these circumstances, the company is in no position to pay its debts or to run its business. The State Government having shut the door upon all further advances, the company can expect no funds from it. No financial institution can, reasonably, be expected to provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercially insolvent, it was the interest of the general public resident and working in New Bombay and of the workmen of the company that had to be considered. There was fraud and mala fides in the passing of the special resolution seeking the winding of the company under the orders of the Court because the company could not have complied with the provisions of the said Act in so far as voluntary winding up was concerned. The only object was get rid of workmen and, having failed to get permission under Section 25-O, the company had restored to the special resolution. The villagers in the New Bombay area had passed resolutions expressing satisfaction with the services rendered by the company so that it was not open to the company to urge that there was dissatisfaction with its services. The corporate veil had to be lifted when the State carried on business through the instrumentality of a company. It was not just and equitable to wind up such a company. If it was beyond the powers of the Company Court to issue directions to the State Government to fund the company so as to enable it to be run, such directions could be obtained in a writ petition and the company should, therefore, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the workmen's slice of the cake would have become increasingly smaller. 31. In the consent terms which were taken on record as aforestated, it was agreed between the company and respondents 1 to 4, as representing 1700 workmen of the company, that the Liquidator would sell either by private treaty or by public auction the company's properties. He would also receive moneys payable by the MSRTC to the company in respect of some 50 buses. From the moneys that would be received by the Liquidator, the company's workmen and employees would be paid their dues first and CIDCO, the solitary other creditor, would be paid only if there was any amount left over. Lest there be any doubts on this score, we make it clear that the moneys that are received by the Official Liquidator upon the sale of the assets of the company and the moneys received from the MSRTC for the buses will be used, in the first instance, towards paying all the dues of the company's employees and workman. Mr. Paranjape, learned counsel for the State Government, has told us that CIDCO and the State Government are agreeable and accept this. By reason of this, the company's liability to its employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company will be given preference for employment in the new corporation and that their suitability will be decided by an expert committee. In addition, it has been stated to us by Mr. Paranjape that the fact that the workmen and employees had been employed by the company will not be treated as a black mark against them. There is accordingly, a fair hope that a large number of the company's workmen will find jobs in the new corporation. 33. A great many of the company's workmen are project-affected persons and had been given employment in the company on that score. If the fact that their services with the company have now come to an end gives them any cause for action against the State, they shall be free to take such action. 34. The company has satisfied us that it has passed a special resolution that it be wound up by the Court, that it unable to pay its debts and that its substratum had gone so that it is just and equitable that it should be wound up. Accordingly, the appeal is allowed. The judgment and order of the learned Single Judge are set aside. The petition is made absolute in terms of prayer (a). 35. On Mr. Ganguli's application, the operation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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