TMI Blog1990 (9) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... s nominees. The shares of CIDCO itself are owned by the State of Maharashtra and its nominees. The object of the company was to carry on the business of carriage of passengers by road and water within and around New Bombay. The nominal capital of the company is Rs. 50,00,000 divided into 50,000 shares and its issued and paid-up capital is Rs. 10,00,000 divided into 10,000 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. The company had losses and labour troubles between 1980-81 and 1983-84. 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 for the suspension of the company's operations with effect from March 3, 1984. On March 18, 1984, a lock-out was declared. On March 27, 1984, the company made an application to the State Government under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its liquidator. On December 24, 1986, a company application for setting aside the winding-up order was filed by respondents Nos. 1 to 4, being four workmen of the company, representing, according to them, 1700 other workmen. The company application was allowed and the winding-up petition came to be reheard. It was dismissed on April 10, 1987, by the judgment and order which is under appeal. 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. By an order made earlier, the Maharashtra General Kamgar Union (respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, namely, is there a conflict between the provisions of the said Act and the provisions of the Industrial Disputes Act in so far as the winding up of a company that is an industrial establishment is concerned, whether it be filed by the company itself or by a creditor. If there is such a conflict and, if permission to close down the undertaking of the company is required to be taken under the provisions of section 25-0 before or after a winding-up order is passed, there would seem 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. It is our view, having heard Mr. Chinoy for the company, Mr. Rana for the Attorney-General, on notice, and Mr. Ganguli for respondent No. 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. Under section 433 of the said Act, a company may be wound up by the court in the circumstances stated therein. These include ( a ) if the company has, by special resolution, resolved that it be wound up by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company commences the process of winding it up at the hands of the official liquidator and it operates eventually to dissolve the company. As and from the date of the order, the company ceases to do business. Where the company is an industrial establishment, that establishment ceases to function upon the passing of the winding-up order. The winding-up order is deemed to be a notice of discharge of the officers and employees of the company. The services of the employees, therefore, come to an end by operation of law. 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 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 purpose 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 ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. (No depreciation has been taken into account in respect of the buses since March 31, 1984). The company's liabilities exceeded its assets, therefore, by Rs. 6,48,00,000. In the affidavit 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. I say and submit respectfully in conclusion in reply to the specific query of this Hon'bl High Court that the State Government has no plans to lend financial or other assistance to revive the appellant company...." It is patent that, in these circumstances, the company is in no position to pay its debts or to run its business. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shortfall in the company's income because the company had been obliged to run its buses as per the State Government's orders. Even if the company was commercially 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 up 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 to get rid of the workmen and, having failed to get permission under section 25-0, the company had resorted 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 direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company to oppose its winding up. The company has not done business since 1984. Since then, the value of its assets has dwindled and the amount of its liabilities has increased. Consequently, the workmen's slice of the cake would have become increasingly smaller. In the consent terms which were taken on record as aforestated, it was agreed between the company and respondents Nos. 1 to 4, as representing 1,700 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 other solitary 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 workmen. Mr. Paranjape, lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, neither the State nor the new organization will be liable in any manner whatsoever." This statement makes it clear that the employees and workmen of the 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 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. 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. The company has satisfied us that it has passed a special resolution that it be wound up by the court, that it is unable to pay its debts and that its substratum has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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