2001 (8) TMI 1305 - HC - Companies Law

Court dismisses winding-up petition against company for unpaid employee claims, citing abuse of process under Companies Act.

The court dismissed the winding-up petition filed by the union against the respondent-company for failing to pay employee claims totaling Rs. ... Winding up - Application for Issues Involved:1. Petition for winding up of the respondent-company.2. Failure and neglect of the company to pay employee claims.3. Dispute over the legality and correctness of employee claims.4. Maintainability of the winding-up petition by the union.5. Availability of alternative remedies under labor laws.6. Locus standi of the union to file the petition.7. Allegations of abuse of the process of the Companies Act by the union.8. Settlement offers and their rejection by the union.Detailed Analysis:1. Petition for Winding Up of the Respondent-Company:The petitioner union sought the winding up of the respondent-company under sections 433, 434, and 439 of the Companies Act, 1956, on the grounds that the company failed to pay the alleged claims of 77 employees amounting to Rs. 4,58,47,593.74. The claims included wages, gratuity, compensation, leave wages, and dearness allowance.2. Failure and Neglect of the Company to Pay Employee Claims:The union argued that the company had failed and neglected to pay the employees their dues. However, the company contended that it had ceased operations in April 1994 and disputed the claims for wages till December 1999, arguing that the employees had not worked and were gainfully employed elsewhere.3. Dispute Over the Legality and Correctness of Employee Claims:The company challenged the legality and factual correctness of the claims computed by the union. It argued that the claims were not ascertained and correctly computed according to the provisions of the Industrial Disputes Act, 1947, and the Payment of Gratuity Act, 1971. The company also pointed out that the union had already filed a complaint of unfair labor practice under the M.R.T.U. and P.U.L.P. Act, 1971, which was pending before the Industrial Court.4. Maintainability of the Winding-Up Petition by the Union:The company contested the maintainability of the winding-up petition by the union, arguing that the union had no lawful locus to file such a petition under section 439 read with sections 433 and 434. The court agreed, citing the Supreme Court judgment in National Textile Workers Union v. P.R. Ramkrishnan, which stated that workers have no right to prefer a petition for winding up of a company.5. Availability of Alternative Remedies Under Labor Laws:The court emphasized that the employees and the union had alternative remedies under various labor laws, such as the Industrial Disputes Act, 1947, the Payment of Wages Act, 1936, the Payment of Gratuity Act, 1971, and the M.R.T.U. & P.U.L.P. Act, 1971. These laws provided special machinery to deal with disputes and claims of employees expeditiously.6. Locus Standi of the Union to File the Petition:The court reiterated that the union could not present a winding-up petition claiming to represent a class of unpaid employees collectively as creditors of the company. The court highlighted the potential dangers of allowing trade unions to file such petitions, including the risk of abuse by unscrupulous leaders.7. Allegations of Abuse of the Process of the Companies Act by the Union:The court found that the union had abused the process of the Companies Act by filing the winding-up petition. The union had already resorted to the remedy under the M.R.T.U. and P.U.L.P. Act, 1971, and its complaint of unfair labor practice was pending before the Industrial Court. The court noted that no other legitimate creditor had sought winding-up orders against the company.8. Settlement Offers and Their Rejection by the Union:The company had deposited Rs. 17,62,500 for 19 employees who had accepted voluntary retirement but were not paid their dues. The company was willing to extend similar benefits to the remaining 56 employees, but the union rejected the offer. The court noted that the union's demands were unreasonable and that the claims in Exh. G were baseless and vague.Conclusion:The court concluded that the union and the employees had legitimate and more efficacious remedies under labor laws for recovering their dues. Consequently, the winding-up petition was dismissed, and the union was spared from costs.