2003 (6) TMI 340 - HC - Companies Law

Chairman's claim for salary & benefits denied by High Court, liability on Corporation, pursue claims there

The High Court dismissed the Chairman's claim for salary, allowances, and facilities equivalent to Ministers of State, ruling that entitlement is subject ... Entitlement to facilities of Minister of State - effect of administrative resolution versus individual notification - construction of Articles of Association and Companies Act - separate legal personality of a company and liability of the State - writ remedy against State where liability lies on companyEntitlement to facilities of Minister of State - effect of administrative resolution versus individual notification - Claim for salary, allowances and other facilities at par with a Minister of State under Annexures 2 and 2/A - HELD THAT: - The Court examined the State Government decision (Annexures 2 and 2/A) and the respondent's contention that the general resolution laying down facilities does not have automatic application to every Chairman unless an individual notification is issued. The petitioner did not previously hold the office of Cabinet Minister or Minister of State and no individual notification in his favour was produced. The Court further observed that appointments and terms of a Chairman are governed by the Corporation's Articles of Association and the Companies Act, and any entitlement must be considered within those statutory and contractual parameters rather than by reading Annexures 2/2A as automatically conferring ministerial facilities in the absence of specific notification. Applying these conclusions, the Court rejected the petitioner's claim to the facilities at par with a Minister of State on the basis that no individual notification or valid grant under the Articles/Companies Act supports such entitlement. [Paras 5, 8]The petitioner is not entitled, on the basis of Annexures 2 and 2/A alone, to salary, allowances or other facilities at par with a Minister of State.Separate legal personality of a company and liability of the State - writ remedy against State where liability lies on company - Maintainability of the claim against the State of Bihar instead of the Corporation - HELD THAT: - Relying on the distinction affirmed in Heavy Engineering Mazdoor Union and subsequent authority, the Court reiterated that a company incorporated under the Companies Act has a separate juristic personality and that liabilities of such a company are ordinarily its own; the State is not liable merely because it controls or appoints directors. Consequently, no direction could be issued against the State for payment of salary and allowances allegedly due from the Company. The Court therefore held that the petitioner's remedy, if any, lies against the Corporation and not against the State of Bihar. [Paras 9, 10]The claim is not maintainable against the State; any claim for payment must be pursued against the Corporation.Writ remedy against State where liability lies on company - liquidation and winding up as forum for claims against a company - Appropriate forum and course of action in view of the Corporation's liquidation - HELD THAT: - The Court noted the respondent's statement that the Corporation's Board had considered and rejected the petitioner's claim and that the Corporation has since entered liquidation with a winding up petition pending. In these circumstances the Court held that the petitioner's available course is to place his claim in the winding up proceedings, if so advised, in accordance with law, since relief against the State is not appropriate where the liability is that of the Company. [Paras 10]The petitioner should press his claim, if at all, in the liquidation/winding up proceedings of the Corporation.Final Conclusion: Writ petition dismissed. The petitioner is not entitled to ministerial facilities on the basis of Annexures 2/2A without an individual notification and, as the Corporation (a separate juristic entity) is the proper defendant, any claim must be pursued against the Corporation-now in liquidation-through winding up proceedings. Issues:Claim for salary, allowances, and facilities based on a government decision for Chairman of a Corporation. Interpretation of Articles of Association regarding the tenure of Chairman. Entitlement to facilities at par with Ministers of State. Jurisdiction of High Court over Government Corporations incorporated under the Companies Act.Analysis:The petitioner, as Chairman of a Corporation, sought salary, allowances, and facilities based on a government decision extending benefits to former Cabinet Ministers/Ministers of State. The petitioner did not hold the office of Cabinet Minister or Minister of State but claimed entitlement to facilities admissible to Ministers of State. The Corporation, governed by its Articles of Association, argued that the Chairman's tenure is co-terminus with the office as Director, subject to the Governor's appointment and removal. The Corporation contended that specific notifications were required for individual Chairmen to avail facilities at par with Ministers of State.The respondents maintained that the petitioner was provided facilities similar to his predecessor Chairman, including staff, car, telephones, honorarium, and allowances. The Corporation's stance was that facilities specified for Ministers of State were not automatically applicable to Chairmen without individual notifications. The Corporation highlighted the absence of a specific notification for the petitioner, citing a precedent involving a former Chairman.The judgment emphasized that the appointment and terms of Directors/Chairman are governed by the Articles of Association, subject to the Governor's decisions acting on the advice of the Council of Ministers. Referring to a previous case, the Court clarified the distinction between Government Companies created by statute and those under the Companies Act, holding that liability for employees lay with the concerned Company or Corporation, not the State Government. The Court dismissed the petitioner's claim against the State of Bihar, directing any claims to be made against the Corporation, which had already rejected the petitioner's claim in a Board meeting.The judgment concluded by dismissing the writ petition, stating no merit in the claim, without costs. The concurring judge agreed with the decision, highlighting the Corporation's rejection of the petitioner's claim and the ongoing liquidation proceedings, advising the petitioner to pursue the claim in accordance with the law during winding up.