TMI Blog2015 (10) TMI 1771X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount receivable by employees, who may not be workmen as such, is not a debt or that they are excluded from the term “creditors” – Employee can locus to file Company Petition in respect of unpaid wages and emoluments, same as creditor of Company and opinion of High Court in case of Pawan Kumar Khullar (supra), is overturned – Decided in favour of Petitioner. - COMPANY PETITION NO. 10 / 2015 - - - Dated:- 24-8-2015 - Shri A. M. Khanwilkar, Shri Shantanu Kemkar and Shri J.K. Maheshwari, JJ. For The Petitioner : Shri Vijayesh Atri, Advocate For The Respondent : Shri Kapil Jain, Advocate JUDGMENT Per: A.M. Khanwilkar, Chief Justice: 1. This matter has been placed before the Full Bench in terms of order passed by the learned Company Judge dated 18.09.2013, in Company Petition No.4/2010. The question formulated for consideration reads thus: Whether unpaid wages/salary of workman/employee can be covered within the meaning of debts under Section 433(e) of the Companies Act, 1956 and the view taken by learned Single Judge in the matter of Pawan Kumar Khullar Vs. Kaushal Leather Board Limited, reported in AIR 1996 MP 85 in this regard is correct? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount. 4. According to the petitioner, the respondent-Company vide letter dated 14.12.2009 admitted its liability, by stating, inter alia, that the respondent-Company was facing financial crisis and unable to make the payment due to prevailing market situation. By the said communication, the respondent-Company also volunteered to amicably settle the matter with the petitioner. The petitioner vide letter dated 26.12.2009 responded by stating that he had shown enough patience for more than 6 months with a hope of settlement of his dues and for that had even given up his II year guaranteed bonus of S$ 131,250. Nevertheless, the petitioner informed that he was willing to discuss about amicable settlement, without prejudice to his rights and contentions. The respondent-Company, however, by letter dated 31.12.2009 even though admitted its liability to pay salary to the petitioner, raised issue of no business brought by the petitioner, for which, was not entitled to receive any bonus. In the said communication, the respondent-Company, however, expressed willingness to pay only salary of the petitioner, amounting to S$ 297,961.67, in three to four installments because of the financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Argha Sen Another Vs. Interra Information Technologies (India) Pvt. Ltd. (2006) 133 Company Cases 49 (Delhi), to disagree with the opinion of the Coordinate Bench in the case of Pawan Kumar Khullar (supra). Accordingly, the learned Company Judge thought it appropriate to refer the question of law as formulated in the order dated 18.09.2013 to Larger Bench for consideration. 8. The counsel for the petitioner has relied on the opinion of the Andhra Pradesh High Court and Delhi High Court in support of his argument that the fact that the amount receivable by the petitioner was towards his unpaid salary, wages and emoluments would not cease to be debt in terms of Section 433(e) of the Act nor it is possible to suggest that the claim of such debt by the serving or former employee of the Company is anything short of claim by a Creditor. Further, even though the petitioner has ceased to be in the employment of the respondent-Company, the tag of employee or worker of that Company cannot be attached to him. If so understood, the opinion of the Coordinate Bench of this Court in Pawan Kumar Khullar (supra) will not come in his way in pursuing the claim under Sections 433 and 434 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent has also invited our attention to Sections 529, 529A and Section 530 of the Act to contend that in view of express provision in the Act giving overriding preferential status to the payment of workman s dues, by necessary implication, it must follow that workers are excluded from pursuing remedy under Sections 433 and 434 of the Act, as also former workman/employee of the Company, for winding up of the Company. It was argued that any other interpretation would result in individual disgruntled workman/employee resorting to remedy under the Companies Act for winding up of the company. Further, that remedy would then be pursued not only by the individual workman/employee, but also by Workmen Trade Unions. The Workmen Trade Unions not only represent the cause of workmen/employees, but also former workmen/employees. For, the claim of workmen/ employees, who are members of the Trade Union, can be espoused only by the concerned Trade Unions. The interpretation given by the petitioner would encourage the Trade Unions to resort to remedy of winding up of the Company, to espouse the cause of its members, instead of pursuing other remedies prescribed by law argument of the petitioner that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onwards, summarized the position in paragraph 33, which is as follows:- 33. To summarize : A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in praesenti or in futuro; debitum in praesenti, solvendum in futuro. But a sum payable upon a contingency does not become a debt until the said contingency has happened. . 13. The application for winding up of the Company, as predicated by Section 439 of the Act, can be presented by the specified enumerated persons. Clause (b) of Sub-section (1) thereof, mentions of any Creditor or Creditors, including any contingent or prospective creditor or creditors. The ground on which relief of winding up of Company can be pursued by the Creditor is ascribable to Section 433(e) of the Act. It envisages - where the company is unable to pay its debts. Where the company is unable to pay its debts, by a deeming provision inserted in the form of Section 434, it is envisaged that if the company fails to respond to the demand made by way of legal notice exceeding the specified amount, there is legal presumption that the company is unable to pay its debts. Indeed, that legal position is rebuttable. Goi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... glish Law, it is noted that debt is a sum of money due from one person to another. A debt exists when a certain sum of money is owing from one person to another. Debt denotes not only the obligation of the debtor to pay, but also the right of the creditor to receive and enforce payment. Referring to the case of DPP v. Turner, (1973)3 ALL ER 124, it is noted that debt normally has one or other of two meanings. It can mean an obligation to pay money or it can mean a sum of money owed. It is unnecessary to multiply the other illustrations, referred to in the said dictionary, except to mention that expression debt has to be given widest amplitude to mean any liability which is claimed as due from any person. 18. The Andhra Pradesh High Court has had occasion to consider similar issue in the case of Capt. B.S. Demogray (supra). Even in that case the petitioner, who had invoked remedy of Company Petition for winding up of the respondent- Company, was an employee of that Company and had resigned from the post of Trainee/Captain before institution of the petition. In that case, resignation was not accepted by the Company till the filing of the petition. In that sense, it was a case si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and had resorted to Company Petition for winding up of the Company in respect of unpaid salary as debt within the meaning of Section 433(e) of the Act. The Division Bench referred to the meaning of word debt as given in Black s Law Dictionary, fifth edition, which, inter alia, mentions that there must be an existing obligation to pay sum of money now or in future. The Division Bench proceeded to observe thus: 17. Before dealing with this specific question, the larger question raised by the learned counsel for the respondent-company that under no circumstance salary due to an employee or officer of the company could be a 'debt' in the context of Section 433(e) of the Act has to be considered for it goes to the root of the matter. This contention, in our considered opinion, is required to be noticed only to be rejected. It is trite that an employee or officer of the company, on completion of the wage period or salary period and after serving the company, acquires a right to claim wage/salary, as the case may be, and he assumes the character of a creditor and the company becomes a debtor. It cannot be gainsaid that an employee of the company, after serving a company f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing wages payable for time or piece work and salary earned wholly or in part by way of commission of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date, subject to the limit specified in Sub-section (2): Section 530(1)(b) speaks of wages in respect of services rendered to the company as a preferential charge. If wages and salary payable to an employee of the company in respect of services rendered to it is made a preferential charge under the Act, there is no good or sound reason to take out the arrears of salary or salary already due to an employee of the company from the definition or meaning to the concept debt in the context of Section 433(e) of the Act. Therefore, we hold that in a given case, 10 * Already reproduced in paragraph 18 above. even arrears of salary due to an employee of the company which is sought to be wound up can be a debt within the meaning of that term under Section 433(e) of the Act and it cannot be said as a general rule, that under no circumstance, arrears of salary or salary due to an employee of the Company can be a debt . 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for winding up filed by them against the Company in relation to unpaid salary/wages for the period when they were working with the respondent-Company, could be maintained by them as Creditors. 24. The decision of the Supreme Court in IBA Health (India) Private Limited (supra) pressed into service by the respondent, in our view, deals with completely different proposition. Further, we fail to understand as to how observations made in paragraph 34 of the said decision can support the argument of respondent-Company - that Company Petition by a former employee of the Company for recovery of his dues, is not maintainable. 25. That leaves us with the decision of the Company Judge of the Bombay High Court in the case of Mumbai Labour Union (supra). Even this decision has been correctly analyzed by the Company Judge of the Delhi High Court in the case of Argha Sen (supra). The apprehension of the respondent-Company that on the interpretation given by the Division Bench of the Andhra Pradesh High Court and Company Judge of the Delhi High Court, if accepted, may result in encouraging avoidable litigation to be filed by the disgruntled employees and Trade Unions, does not commend to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in M. Suryanarayana (supra) and of the Company Judge of the Delhi High Court in Argha Sen (supra). 29. We accordingly, hold that the employee of the Company has locus to file Company Petition in respect of his unpaid wages/salary and emoluments, as having been filed by a creditor of the Company. As a concomitant, the opinion of the learned Company Judge of our High Court in the case of Pawan Kumar Khullar (supra), is overturned. 30. While parting, we may clarify that we may not be understood to have expressed any opinion on the merits of the claim of the parties or for that matter on the question relevant for exercise of discretion of the Company Judge to entertain the Company Petition, in any manner. Those issues will have to be decided at the appropriate stage. 31. We further clarify that we may not be understood to have expressed any opinion on whether the Trade Unions have locus to espouse the cause of workmen/employees regarding unpaid salary/wages against the Company by way of a Company Petition. That question can be decided in appropriate proceedings, as it is not relevant in the present case. 32. We answer the issue referred to us on the above terms and direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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