NATIONAL TEXTILE WORKERS' UNION ETC. v. P.R. RAMKRISHNAN AND OTHERS.

1'1ATfoNAL TilXTILES v. P.R. RAMAKRISHNAN (Chinnappa Redjy, l) 957

CHJNNAPPA REDDY, J. I agree with my brother Bhagwati. I' A wish' to add a few· words not because I have much more to say; nor ever hope to say what be has said, more felicitously but because ·. my, brother Venkataramiah bas disagreed and my regard. for him compels•me to add a few words of explanation ..

''··.. you ·take my life when you do take the means whereby B· I live" (Sbakespeare : The Merchant Venice). •

This indeed is the· cry of the workers of Ramakrishna Indus~ ; tries '(ll) Ltd. who desire to be heard before the bread is taken out \lf their mouths. A' battle royal appears .to be raging between two· C. rival groups of shareholders of the company. A petition for Wind- ing-up the company has been presented by one group of share- ------·· holders. And an application for the appointment of a provisional liquidator too. Quite apart from Sec. 445 (3) of the Companies Act which provides that the order for winding-up shall be deemed· . to be notice of discharge of the officers and employees of the company, except when the business of the c~mpany is continued, it is plain· tbai tlie future of· the workers~is at stake and their right to work is in jeopardy as a result of the presentati'on of the winding-up petition. U~like the shareholders, to m,ist of wb~m the shares they 'hold represent mere investments and to some of whom,, the means to control the affairs of the company, to the workers, the life E ~f !lie company is tlieir, own and. its welfare is theirs.. They are so iatiinaiely tied.' up that their interest in the survival and the well• beiiig of the company is much more than the interest of any sliareliolder.:: lie he an ' investor~ a 'c~rporate commander' or a corporate inariipulator. How then is it possible that these persons.,,.: th~ worlfors whose very existence may be.under threat of exlinc-· to tion::...aie "be 4enieda .bearing, even if sought, when a petjt\onfoi:' w'indin'g-up is presented io a court. 1t is .said that the. to~l'anies Act does not contempl~ie a hearing to the workers.. Only contribu: tories and credilqrs may''b~ heard it seems .. Workers may'n~t be. allowed to throng the company cou'rt, only ihose who buy,. seB an_d control shares and the usurers, the stockbrokers and the money brokers. Those who invest money may be heard, those who invest their lives may' not ·be· ·heard; ·No. ·The Companies Act does not 1 prohibit a· bearing to ,the worlCers., ·The: Com]lailies Ai:t' does iJot say ·who may be 'heard. ··The Companies·Act·does.irot provide'fo.r , all situations.. The Company· Judge must decide.some mattersO .He' must use his imagination. ·He must use bis discretion.· But; 'without' transgressing aliy, legal notni's·Compatiy Law is•not a 'field' in :·which

958 · SUPIU!ME COURT REPoRTS l19s3i i s.<l.it ' 'flnaiily is lo be expecled'. The law 'falls to be applied to a growing and changing subject matter'. This is recognised in the report of the Jenkins Committee in the. United Kingdom and in this country, in the Statement of Objects and Reasons to the Companies Amend- ment Act of 1974. So, when.new situations arise, as indeed.they are bound to arise having regard to the complexities of growth and change, the Company Judge cannot retreat into the Corporate shell. • but must expand and expound. He must take the bull by the horns . as it were. He must recognise and expose the reality of the workers' interest and the dubiety of ihe interest of the others. He must -"'- acknowledge the \transformation which corporations are proseotly undergoing from capitalist. contrivances into socialist instruments. c • No doubt, it was the creative genius of the bourgeoisie thai invented the corporations and the companies, invested them with a corporate soul and a juristic personality and called them legal entities in order to meet the growing and complex demands of modern industry and management, to conduct business and commercial D activities more conveniently and efficiently, and essentially to foster, consolidate and stabilise the 'Capitalist system of society under whose aegis alone the exploiting class· could thrive and continue to exploit the working class. Corporations became the symbol · of competitive capitalism. But the historical processes continue at work. The move- E ment is now towards socialism. The working classes, all the world over; are demanding 'workers' control' and 'Industrial Democracy'. They want security and the right to work to be secured. They want th~ control and direction of their lives in their own hands and not in the hands of the industrialists, bankers and brokers. Our constitution has accepted the workers' entitlement to control and it is one of the Directive Principles of State Policy that the State shall take steps, by / suitable legislation or in any other way, to secure the participation of workers in• 'the management of undertakings, establishments or other ort!anisations ·engaged in any industry. It is in this context of changing norms and waxing values that one has to judge the workers' demand to be heard. G And, what !lo the workers want? They want to be heard lest their situati.on be altered unheard. They invoke natural justice, so to claim justice. They invoke the same rule which the courts compel H administrative tribunals to observe. Cao courts say, natural justice need not be 'observed by them as they know how to render justice without observing natural justice? It. will surely be a travesty of

NATIONAL TEXTILES v. l'.R. RAMAKRISllNAN (Chinnappa Reddy, J.) 959

justice to deny natural justice on the ground thafeourts know better. There is a peculiar and surprising misconception of natural justice;· in some quarters, that it is, exclusively, a principle of administrative' law. It.is not. [tis first a universal principle -and, therefore, a rule of administrative law. It is that part of the judiciai procedure Which· is imported into the administrative process' because of·its u'niver' sality. · "[t is of the essence of most systems of justice,--certainly of 8 the Anglo-Saxon System-that in litigation both sides of a. dispute must be heard before decision. 'Audi Alterum · Partem' was the aphorhm of St. Augustine which was adopted ·by the courts at a time when Latin Maxims were fashionable". ''Audi Alterum Partem is as much a principle of African" as it .is of En'glish legal procedure;' a popular Yoruba saying is: 'wicked and iniquitous is he who decides a case upon the testimony of only one party to it" (T.O. Elias : The Nature. of African Customary Law).· Courts even more than adminis-' trators must observe natur~l 'justice. ; ' '· ·

. e'.l "" [t is said that the Companies Act does. not confer any special rights on the workers, .they are virtual strangers to the Act and so why should they be heard in the petition for winding-up ? The duty to hear those asking to be heard is not dependent on the vesting· of. any right under the very statute in respect of which jurisdiction is being exercised by the court, but on any right whatever which may -· come under. threat. Surely ·it is not. the law· that rights other than those created by a particular statute may b~ taken away· in proceed- E

ings under that statute without affordi.i1g a hearing to tboso desiring .. to be heard. [f the statute .says only so and so will bl' heard and, . no other, of course, no other will be beard . . [f the statute d()es not '~ say who may be beard, but prescribes the procedure for the hearing, . ~. that procedure must be followed by every one who .want to be heard F and what applies to one will apply to the other •.. If creditors and contributories desire to . be heard and are beard, so shall workers. After bearing the workers, the court may say that, on the· facts .and circu111stances of the case, it is not necessary to hear them further; . but they cannot be turned away at. the .very threshold. It. may . be that it is not for them to support or oppose the winding-up peiition for any of the traditional reasons. But they may. !!lake suggestfons which may avert winding-up, save the company and save their o_wn. live.s. They may have suggestions 10 make for restructuring '.the, company or for the transfer of the undertaking as a running busi- .H. ness. The workers themselves may offer to run the industry forming themselves into a society. They niay have a myriad suggestio.ns -io

SUPREME c<iuit RBPoRT5 (j 983j I s.c.R

make,. which they can do if they are allowed to .be beard. If .every bolder of a, si_ngle share out of thousands may be heard, if every' petty creditor may be heard, why can't the workers be heard ? It is sai~ that once the workers are allowed to enter the Company. Court, the flood gates will be opened, all and sundry will join in the.fray an.d utter confusion will prevail. These are dark forebodings. for wliich there is no possible justification. The interest of the workers · is..• limited. . _,. It is the interest of the others, . those that battle for cqntr91. and for. power that may create chaos and eonfusion. It mu.st not be forgotten .that the court is the master of. the proceed- ings an'1 the ultimate control is with the court.. Parties may not be impleaded for the mere asking or beard fc;>r the mere seeking. The c court, may well ask the reason why, if some one seeks to be· heard. Wo~kers will ,n.ot cr~wd the Company Court and the Court will not be helpless to.keep out those whom.it is not necessary to hear., It is said that workers will not be allowed to intervene. in a partition er a partnership action to oppose partition or dissolution of partnership and so. why should they be allowed to intervene in a winding-up peti· tion. That is begging the question. There is no reason why workers D may. not be allowed, in appropriate cases, to intervene in partition and partnership actions to avert disaster and to promote. welfare. As we said, impleading and hearing . are not for.the mere asking and seeking;

E Re Bradford Navigation Company and • passages ·from. text •. ·. books for which the case is the source of authority were relied upon, 10 urge that none but contributories and creditors may be heard·in winding-up petition. Re Btadford Navigation Company is a relic of an alien past.. Fortunately it· is not a binding precedent.· While · we have learnt and borrowed a great deal from British· Jurisprudence, / we have been drawing the lioe now and then, here and there, because their law, thelr jurisprlldenee suits their genius and ours must]develop according to our genius.· Our needs are different;· our social; political and economic bases are different; our aspirations are different; our systems are different; the stages of our development are different. We have a written constitution which is omnipresent when oure laws are made, tested, interpreted or executed. We look to the constitu- , tion for guidance and inspiration when we interpret the. laws. The. ~2nd Amendment of-the Constitution has introduced new lights into the Constitutioil'. The Constitution is now openly socialist The· Direciive Principles of State Policy repeatedly emphasise the role and interest of the workers. Article 43-A, also introduced by the 42nd . '

NATIONAL TllXLiLES v. P.R. RAMAKRISHNAN (Chinnappa Reddy, J.) 961 Amendment contemplates worke.rs' participation in. the management of industry. Other Directive Princi;iles require the State to make - provision for securing the right to work, for securing just and humane conditions of work and for securing the right to an adequate means of livelihood. The State is enjoined .to. direct its policy towards securing that the ownership and control of the material resources of the ·community are so distributed as best' to subserve the common good.and that the operation of the economic system does not result in the concentration of wealth and means of procluc- tion to the common detriment. Obviously, it is nationalisation that is in view and nationalisation must mean the setting up of public corporations and the transformation of private corporations 'into public corporations. Truly the Constituti_on envisag~s work~rs' c control ahd nationalisation as two of the roads to socialism. Private corporations hitherto regarded as bastions of private property and leaders of capitalist economy are undergoing transformation and, are surely acquiring the character of public institutions. The public interest element is now quite a ·predominant factor in the Com- D panies Act itself. 'There are several provisions in the Companies Act which take _notice of the element of public· interest: There are other enactments like the Monopolies and Restrictive Trade Practices Act, the Industries Regulation and Development" Act, under whose provisions, the activities· of ·a. company in~y be scrutinised in the . public interest. There are a . host of other legislations involving employment and welfare. of labour, . to which the managements o( E companies are subject. The transformation of a company's.character from private to public is going,on right before our eyes. even ·as the institution of private property is also losing its diathesis. It .is in this context of ferment and development that we must. consider the problem before us. There is no sanctity attached to the age of a judgment o-r to the circumstance that the ·decision is' that of· an F English Court from where we have borrowed most of our company law. Re Bradford Navigation ·company was decided in the heydays of laissez faire at a time when individualism dominated every field and the·public interest was but a slow• runner. Now the position is reversed., Laissez faire . has long· been dethroned and ·all interests G are increasingly subordinated to the· public interest Corporations· are themselves assuijling a public character and function like mini- States but surely they wili not be allowed to fnnction as slave States· where the voice of the slave "!ay never be·lieard .. H In Britain itself corporate law and labour law have changed considerably and are still changing. Courts no longer·· view. trade

962 SUPREME COURT REPORTS [1983J 1 s.c.R. A unions with suspicion, as conspiracies as they once ·did. The right \. to work, the right to collectively bargain and the right to strike are well recognised. After nationalisation of certain important and crucial industries by the successive Labour Governments, workers' participation in management has become a reality and today a considerable measure of workers' control of management has been B achieved in industry. There are now persistent demands that Company Law too should recognise the interest of workers in a company. Prof. Gower in his "The Principles of Modern Company Law'' says:- • c "One section of the community whose interests as such are not afforded any protection, either under this bead or by virtue of the pr.ovisions for investor or creditor protec- tion, are the workers and employees of the taken-over company. This is ·a particularly unfortunate facet or the principle that the interest of the company means only the D interest of the members, and not of those whose livelihood is in practice much more closely invo.lved". Again be says, later, "The vexed question of tiie relationship between the employees and the company which employs them is, in fact, E a dominant theme in the current debate which flows over from company to labour law. It is generally accepted that it is unreal for company law to ignore, as at present our · law largely does, that the workers are as much, if not more, a part of the company as the members of it". F That is the way the wind is blowing in- Britain and there is, there- fore, good reason for holding that· the rule in Bradford Navigation Company is not valid in the.present times.

I may conclude by a reference to the following observations made in another connection by D.A. Desai, J in Panchmahals Steel G Ltd. v. Universal Steel Traders(').

"Time-honoured· approach that the company law must safeguard the interest of investors and shareholders of the company would .be too rigid a framework in which it can H - ...._ (2) 46 Company Cases 706;

NATIONAL TBX'IJLES v. P.R. RAMAKRJSHNAN (Venkataramlah, J.) 963

now operate. New problems call for a fresh approach . ·.. A As Prof. De Wool of Belgium puts it: the company has a three-fold reality •. economic, human and public-each with its own internal logic. The reality of. the company is much broader than that of an association of capital; it is a human working community that performs a collective action for the common good. In recent years, a del.pte is going on in B the world at large on the functions and foundations of · corporate enterprise. The "preservationists" and the "reformers" are vigorously propounding their views on the possible reform of comp.any, the modem trend emphasising the public interest in corporate enterprise". c . The case itself is an instructive one and demonstrates bow an imagi- native Company Judge may help to restructure and infuse new life into a comJ>any whose life .is. ebbing out; within the four corners of the statute and keeping in view the interests not merely of the credi- tors and the contributories but also the interests of the workers . D

• Viewed from any· angle, of · natural justice, of the constitution or of the expanding theory of company law, there, appears to be no obstacles to a Company Judge hearing the workers, when· asked, after a winding up petition is presented; I agree with the order pro- E posed by- Bhagwati, J.

F VENKATARAMIAH, J. I had ·the privilege of reading the draft ··judgment prepared by my learned brother, Bhagwati, J. but I regret mr inability to agree with him.

G Messrs Ramakrishna Industries (P) Ltd. (hereinafter referred to as 'the Company') which is carrying on its business at Coimbatore. in the State of Tamil Nadu is a closely held private limited company governed by the Indian Companies Act, l 956 (hereinafter referred to as 'the Act'). The Company's paid up capital is Rs. 15,95,000 ·H divided into 1595 equity shares of Rs. 1,000 each, the bulk of

~64 SUPREME c6URT REPORTS (19S3)i s.c.il.

A which i~ h~ld by the members of a Hind'u family whose relationship is as ,follows :

V. Rangaswami Naidu - Chinnammal (wife) (deceased) (deceased) ( 7 shares) (10 shares) B. I I I -I I I I V. Kamalammal =R. Venkata- P.R. Rama- = Mrs. 'Raje- (wife) swami Naidu krishnan. swari c (164 shares) (20 shares) : (34 shares) Ramakrishnan I I (85 shares) ~r--•

I L I 1·-~ I I I I I I' V.. Radha- V. Mano- V. Rajkumar ' I krishnan . haran (148 shares) I D (164 shares) (146 shares) =Thnlasi , I. ' ' =Anusuya I I I I I . K. Prabhu I R. Baba Chaodersekhar I I S. R. K. Prasad E (160 shares) (168 shares) (.J 61 •share;)

The gronp of R. Venkataswami Naidu holds 642 shares and the group of P.R. Ramakrishnan is holding 608 shares. 17 shares stand in the : name of late V. kailgaswami Naidu·and his wife and 300 shares are held by. V. Rangaswami Naidn Educational Trust. F R. Venkataswami Naidu and P.R. Ramakrishnan are trustees for life of V. Rangaswami Naidu Educational Trost having control° over the shares held by the Trust They .are·also treated' as Life Directors. Only 5 shares stand in the name-of .'others. V. Kamalammal, Mrs. Rajeswari Ramakrishnan, V. Radhakrishnan V. Manobaran, 'G K. Prabhu and R. Baba Chandersekhar are directors and V. , Rajkumar is the Managing Director of the Company. The Company is thus under the exclusive control arid· management of the members belonging to one family. 'serious differences having arisen amongst them regarding the IDanag~ment of the affairs of the Company, P.R. Ramakrishnan, bis wife and sons filed a petitioli being Company H Petition No. 30 of 1981 on ihe file of the High Court of Madras on Jilly 13, '1981 for the•winding'np of the·Company under section

NATIONAL TEXTILES v. P.R. RAMAKRISHNAN (Venkataramiah, J.) 965

• 433(e) and (f) of the Act on the ground that it was just and equit- able to do so in view of the alleged deadlock that bad arisen in the administration of the affairs of the Company. The petition _charged the memb~rs belonging to the gr~up of R. Venkataswami Naidu with acts of misconduct;waste and malversation,· a detailed reference to which. is unnecessary for purposes of this case. Along with the above A

petition, the petiiioners therein flle~ Company Application No. 843 of i981 praying for the appointment of a Provisional Liquidator and Company Application No. 844 of 1981 for an iiitedni order restrain- ing t_be Company and other respondents from borrowing moneys from bankers and other •·financial institutions wit.bout prior permis- sion of the Court and from otherwise ali~nating the assets of the Company pending disposal of the sajd application. The· learned Company Judge' passed an interim order on July 13, i98l itself restrainfog until further orders the eleven respondents named in the application from borrowing ~ny moneys from banks, finanCial insti- tutions or others witbou( prior permission: of the Court and from alienating and/or creating any charge or encumbrance over any of D the assets of the Company in its. various enterprises. The above. interim order was passed even though on the same date application . was opposed by the co_unsel for the responden\s therein. The case was adjourned for further consideration to August 10, 1981. On August 19, 1981, the above interim order :-vas made absolute in the following terms :- E __,' "In the result there will be an · injunction restraining respondents.-! to 6 from borrowing any moneys from banks, financial .institutions 'or others and from alienating and/o! creating any charge or encumbrance over any of the assets of the first respondent company in its various enterprises .F except that the first respondent c_ompany is. entitled to honour any pending contract entered into by the company with third 'parties before the presentation oftbe application, all its existing commitments vis-a-vis its staff and· labourers, electric charges, central excise duty, LIC premium, pay- ments due to employees cooperative stores, telephone bills and sales-tax dues, availing the existing bank facilities with any of its bankers, .sllbject to the ~ondition that the parti- culars for all these payments and the source from which such payments were )o be met, a~e furnished in detail to_ the ·applicants. It is again made clear that the company is H always at liberty to approach court for further dire9(ions

966 SUPREME COURT REPORTS (19831 ls.c.~-

and that, the applicant's right to impugn any such transac- A tion under section 536(2) is left untouched". t In the meanwhile three trade unions viz. the Coimbatore District National Te~tile Employees' Union, Coimbatore ; the Coimbatore District Engi_neering Workers' Union, Coimbatore and B the- National Textile Workers' Union (INTUC), applicants in Company Application Nos. 880, 881 and 883 of 1981 respectively applied to the Court to implead them as respondents to the winding- up petition i.e. Company Petition No. 30 of 1981 alleging that their interests had been adversely affected by the interim order - which according to them bad the effect of preventing the management of the c Company from paying amounts due to· workers and also making pay- ments for securing supplies to the stores from which the workers were buying articles of food and other provisions. Tbese applications were opposed by the petitioners in the winding-up petition stating that the trade unions being neither creditors nor shareholders had - no locus srandi to be- impleaded as respondents to the petition. 0 It may be mentioned here that the Company Petition for winding-up · bad not yet been advertised at that stage and_ Rule 34 ~f the Companies (Court) Rules, 1959 was not attracted. The Company Judge dismissed these applications filed by the trade unions for . impleading them as respondents by his order dated September 14,

1981. Against that order only the National Textile Workers' Union E (INTUC) filed an appeal before the Division Bench of the High l . Court being OSA No. 148of1981-. That appeal was dismissed by the Division Bench on September 30, 1981. The petition for special leave to appeal (Civil) No. 1961of1981 was filed before this Court under Article 136 of the -Constitution · by the National. Textile Workers' Union (INTUC) on November 6, 1981. The said Special F a Leave Petition came up for orders before Bench of three Judges OD November 19, 1981._ On that date noiices were issued to the respon- dents, The High Court was permitted to .pass its orders on the application for appointment of a provisional liquidator which was pending before it but it was ordered that in the event of a provisional liquidator being appointed, he should not take any steps which would prejudically affect the workers. The above order was further_ modified by this Court on December I, 1981. The petition_ was posted for hear- ing and disposal before a Bench of five Judges as the matter involved an important question of law relating to the .focus standi of the trade unions to be impleaded as respondents to a winding-up petition and their right to oppose or support it.

NATIONAL TEX11LES v. P.R. RAMAKRISHNAN ( Venkataramiah, J.) 967

Petitions for Special Leave to Appeal (Civil) Nos. 10248 and · A 10249 of 1981 filed respectively by the Coimbatore District National . Textile Employees' Union and the Coimbatore District Engineering Workers' Union directly against the o.rder of the Company Judge dated September 19, 1981 rejecting their applicatiom for being · impleaded as parties to the Company Petition are also ·heard along with the above Petition for special leave to appeal (Civil) .No. 9661 B of 1981.

At the outset it should be noted that the company ·laiv in force in India i.e. the Act, as in England, is an amalgam ·of certain princi- ples of the law of contract,.of the law of p~rsons and of the law of c partnership which require the partners of a firm to be just and faith- ful towards each other. ,A company is an association of persons for some common object or objects. A Company has a legal personality. It is an artificial person as opposed to a natural person. It comes into existence on its registration in accordance with law. The memo- randum of association and the articles of ·association-of a company D j which are filed at the time of its registration .are considered as the constitutional documents which contain the fundamental terms which govern it. The memorandum contains conditions some of which are basic tO its existence even though they may be alterable by following the prescribed procedure. The articles which contain the terms relating to the internal regulation may be altered by the members by passing appropriate resolution. The articles are, however, subject to the terms of the memorandum. ·Both these documents should, however, conform to the Act. The actions of the company are sub- ject to the doctrine .of ultra vires whose purpose is to protect investors in the company and to protect the interests of its creditors. The F directors of a company are its agents and they stand in a fiduciary relationship to the company. The duties of good faith which are impo- sed by this fiduciary relationship are virtually identical with those imposed on trustees. The directors are generally expected not to place themselves in a position where their duties towards the company con- flict with their personal interests. A company cease·s to be in existence on its dissolution which follows the winding-up proceedings which may be either by the Court or voluntary winding-up (either members' . ·voluntary winding-up or creditors' voluntary winding-up) or winding up subject to supervision of the Court. There are detailed provisions in the Act governing the different winding-up proceedings referred to above. The principles of administrative law which concern the control of governmental power have 11ot much relevance to the

968 SUPREME COURT REPORTS [1983} I S.C.R. A administration of the affairs of a company, the primary purpose of administrative law being the imposition of checks on the powers of government or its officers so that they may not either abuse their· powers or go out of their legal bounds. In particular, the proceed· ings relating to winding-up by Court are subject to the orders of higher courts in appeal and are not amenable to interference by 8 superior courts as in the case of actions of government or its officers. The winding-up proceedings by Court are governed by the Act and the Rules made thereunder.

We have been taken through various English text books on c Company Law such as 'Palmers Company Law', 'Gore Browne on Companies', 'Buckley on the' Companies Acts' and Gower's Principles -._,-~--· or Modern Company Law. In none of them there is any statement to the effect that officers and employees (who are not creditors or contributories) of a company for whose widing-up a petition is filed would be entitled as_ of right to be impleaded as parties and to contest the petition. There is also no authority of English Courts recognising such a right in any trade union. It is not also shown that any such right of a trade union is recognised by the Indian law which more or less corresponds to English law in this regard The decision of the Bombay High Court In re. Edward Texiile Ltd.(1 } is a clear authority for the proposition that any /rate trade unions have E no locu~ standi to oppose a winding-up petiti~n.

We shall proceed to decide this case on the assumption that ' .. the application for impleading was made, in fact on behalf of the workers and not by the trade unions.

F The main argument urged in support of these appeals is that because under section 445(3) of the Act the, passing of a winding-up order of a company by th~ Court amounts to a notice of discharge to the officers and the employees of the Company, except when· the business of the company is continued, the 9fficers and employees should be afforded an opportunity to contest a winding-up petition after being impleaded as parties and if possible avoid the winding-up of the company. To appreciate this contention, it is necessary to refer to some of the provisions of the Act. Section 433 of the Aci · sets out six circumstances in which a company may be wound up by the Court. A company may be wound .up by the Court on one or more of the following grounds, namely, (a) if the company has by

(I) 38 Company Cases 284,

NATIONAL TEXTILES v. P.R. RAMAKRISHNAN (Venkataramiah, J.) 969

A . special resolution, resolved that ·the company may be wound up by the Court, (b) if default is made in delivering the statutory report . the Registrar or in holding tile statutory meeting, (c) if the company to' '

does not commence its business within a year from its incorporation, or suspends its business for a whole year, (d) if the number of members is reduced, in the case of a publi.c company, below seven, and in the case of private company below, two, (el 8 if the company is unable to pay its debts and (flif the Court . is of opinion that: it· is just and equitable that the company should be ., wound up. Section 439 of the Act provides th"c: t an application to the Court for the winding-up of a company shall be made by way of a petition presented to the· Court subject to the provisions of that section. · A petition for winding-up of a company may be filed by CJ all or any. or" the following viz. the company, its creditors including any contingent or prospective creditors or by any .contri.butory: Such a petition can be filed by the Registrar of Companies and in a case • falling- under section 243, by any person authorised by the Central Government. Sub-section (2) of section 439 of the Act treats certain classes of persons as creditors for purposes of ·that section. Sub- D section (3) ·of section 439 treats the balder of a fully paid up share . also as a contributory even though he may not be liable to contribute any further sum io the assets of a company in the event of its being WOIJDd up and a contributory may file a petition for winding-Up provided he is not .debarred from doing ·so by sub-section (4) of section 439. The Registrar can file a· petition under clauses (b), (c), E (di, (ei and (f) of section 433 of the Act subject to the conditions specified in section 439 except in cases where he is authorised under section 439(1)(f). Sub-sections (6); (7) and (8) of seciion 439 of the Act refer to the other conditions governing the filing of a.winding-up petition. F Wlien a company has passed a special resolution resolving that the ·company may be wound up by the Court:the employees and workers can have hardly any ground to object to the winding· up of the company .. The position is the same whe~ any of the defaults mentioned in clauses (b) and (c) of section 433 of the Act are com-· milted by the company. The officers and employees of the company G . also cannot get over the deficiency in' the required number of members of a company Teferred to· in clause (d) of secti~n 433. When a company is unable to pay its debts, a creditor may move ·a petition for the windi~g-up of the company. Such a creditor cannot H be compelled to prove his·claim not merely . against the company but also. against the officers and employees, W(!eri t!wre is ii. d~adloi:I<;

970 SUPREME COURT REpORTS [1983] I s.c.R.

.A in .the management of the company arising out of disputes amongst

' the directors or where soine directors , without any justification exclude some other directors.from the management of the company, it would be unreasonable to expect the excluded directors to fight the case boih against the directors who .are responsible for their exclusion and also against the officers and employees who are neither B creditors nor contributories but who may be supporting the contest· ing directors. The law on the question as to who can be heard as ofright in a winding-up proceeding is .set out in paragraph 1028 in Volume 7 of Halsbury's Laws of England (4th Edition) thus:

" ... Only the petitioner, the company, and creditors and contributories are entitled to appear on the petition ; other parties have no right to be heard, and, even if . court of first. instance elects to hear them as amici curiae, they have no right of appeal." • The above passage is based on the decision of the English D Court. in In re. Bradford Navigation Company(') where Sir W.M. James, L J. observed at page ~OJ thus :

"I am of opinion. that this preliminary objection must prevail. It appears to me that the Appellants' argument is based upon a misconception of .what a winding- up order E and what a winding-up petition is. It is a substitute for a suit for winding-up a partnership. I't is a power irpplicable by the Act of Parliament to corporations as well as to unincorporated societies. Partners. have a right to file a bill one against the other, and to have the usual decree for .F the administration of the partnership property, and for the settling of the partnership accounts and liabilities. In the case of large companies, winding'up was thought to be a more convenient course than a common partnership suit, but in ever)' other respect it is the same. In a common part· ' nership suit nobody can be made a party, or can be· heard, • G a except the partners themselves, and,' originally, winding· up was the same thing. Contributories were the only persons who could be heard ; but as creditors were interfered with • by the operation of the winding-\)p, the Act of Parliament has made a winding-up a matter both for creditors and contributories. A creditor may' present a petition for \

I. (1) [1870] 5 Cb. p. 600.

NATIONAL TEXTILES v. P.R. RAMAKRISHNAN (Venkataramiah, J.) 971

winding-up, and b() th creditors and ·contributories· are heard A ./ upon that ; but it is new to me to say that any person who has an interest i~, or a right to or in respc;ct .of, soine of the property of the company,.large or small, bas right to appear as a litigant here, because that company chooses to apply for an order with respect to iiself. In· this case the company was desirous of being wound up. I am of opinion B that the winding-up order does not in the".sligbtest degree derogate from any right whatever which any member of the public has with respect to this canal. The winding-up will / deal with such rights as' the partners in tlie partnership can deal with themselves.. The Court will deal with it just as the partners themselves could have dealt with it" ...... In the c Court below the Court might·very well say to a person so· situated, "I should be glad to bear you as amicus curiae, if you have an interest, that I may know what public grou!}ds • . there are." There the Court might use its discretion, and think it right to bear ·such· an objection ; but when it comes before me on a Petition of Appeal from the Order, then the D .• Appellant must show that be fills some character in which be bas a right to litigate with the company. I am of opinion that be does not fill any such character, and that the Petition of Appeal must be refused with costs." l!I This decision may be of the last century but. there is hardly any justification to depart from it even now unless compelled by the statute to do so.

That only the company, creditors ·and contributories (apart from the Central Government or the Registrar when they choose to intervene under the express provisions of law) are entitled to parti- cipate in the winding·up proceedings is emphasised by sections 447 arid 557 of the Act. I They read : . • ''447. Effect of ~nding-up order-An order for winding-up a company shall operate in favour of all the creditors and of all the contributories of the company as if it. had been made on the joint" petition of a creditor and of ., a contributory." H "557. Meetings to· ascertain . wishes of creditors. or contributories.-(!) In all matters relatin~ to the windin·g-up

972 SUPRBMB COURT RBPORTS (1983] l S.C.R.

A ·of a cdmpany, the Court may- \. (a) have regard. to the wishes of creditors .or contributories of the company, as proved to it by any sufficient evidence; ·

B (b) if it thi,nks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contri- b.utories to be called, held and_ conjlucted . in such manner as the Court directs ; and

r (c) appoint a person to ·act as chairman of any such c meetings and to report the result thereof to the Court.

· (2) When ascertaining the wishes of creditors, regard shall be had to the value of each creditor's debt.

,, (3) When ascertaining the wishes of contributories, regard shall be had to the number of votes which may be cast by each contributory."

That a company, the Official Liquidator, the liquidator, creditors and contributories alone can effectively participate in and contest the winding-up proceedings is clear from some of the other provisions of the Act governing the wiodiog~up · proceedings. Under section 450(2) of the Act before appointing a provisional liquidator, the Court has to give·notice to the. company and give a .reasonable opportunity to it io make its representations, if any, unless, for special .reasons to be rec6rded in writing, the Court think> fit to 'dispense with such notice. The Court may, under section 466 of / the ·Act at any time after ma.king a winding-up order, on the . application either of the Official Liquidator or of any creditor or contributory, make an order staying the winding-up proceedings on being satisfied that there are good reasons to pass such an order. Section 478(3) authorises any creC!lt'ilr or contributory in addiiton G to the Official Liquidator to take part in the public examination of promoters, directors etc. held for the ' purpose of enquiring into the conduct of such promotees · or directors in connection with the . promotion or formation or the conduct. of the business of the ' company. Section 517 of the Act provides that in a voluntary H · winding-up; an arrangement entered irito by the company and the ' creditors as provided therein is binding on the creditors and any ~reditor or contributory who is aggrieved by such arrangement may

NAtlONAl THXTILES v. P.R. RAMAKRISHNAN (Venkatatamiah, J.) 913

appeal. to the Court. Under section 518, the liquidator or any contributory or any creditor may apply to.the ·court in a voluntary. winding·up proceeding to determine any question arising in the winding-up of a company. Under section 54 ! . of the Act on the application of ,the Official Liquidator or the liquidator, or .any creditor or contributory of the. company the· Court· may, if it thinks fit and proper so to do, declare that any persons who were knowingly 8 . parties to the carrying cin of business of the company .with intent to. defraud creditors or any other person shall be personally responsible for all or any of the debts or liabilities as the Court may direct. The Court ·can exercise power to assess damages against·delinque.nt direc· · tors of a company which is ordered to. be wound-up under section 543 on the application of the Official Liquidator, or of the Liquidaror, ~· . ----·. or of any creditor or contributory made within the prescribed time. In ·the.case of a voluntary winding-up under section 546 .any creditor-. or contributory m.ay_ apply to the Court with respect io exercise of any P.OWer by the liquidator under section 546(1). Section 549(1)' of the Act provides that at any time after the making of an order _, D for the winding-up of a company .by or subject to' the supervision ' . of1the Court, any creditor or contributory of the company . may, if the Supreme Court, by.rules prescribed so permit and in accordance with and.subject to such.rules.but not further ()r otherwise, inspect the.books and. papers of the company, . A_ny cred~or or contributory:. may. under , section 556 apply to the Court to enforce tile duty of liquidator to make returns etc. These and other provisions Of the Act· show that only the company, the Official Liquidator,.liquidator, creditors, contributories· .or !·he Registrar have-a statutory rightto · of participaie as right in the \Vinding-up proceedings as provided .in· the Act. The workeu or thek trade unions· have not been given any• such right, FL-

The words 'every person' in Rule 34 of the .Companies (Court)· Rules, 1959 (which is almosi similar to the- corresponding English Rule) do not entitle a- worker who is neither a shareholder rior a contributory to support or oppose a winding-tip peiition under ti:iat G·,. - Rule because they refer only. to a person who is otherwise entitled · 10· do· so under the Act. We sh6uld· also bear in mind thai -an ' anam:olous result that may llow from the acceptance of the case or-the workers is that whereas in a winding-up by Court they maf'. get an opportunity to cont~st the petition: the voluntar~ winding-up proceedings.or winding-up under the supervision of the Court would go on without any such contest although in all cases ultimately the

974 SUPREME COURT REPORTS (198)] l s.c.R.

A workers will be discharged from service. A construction which leads to such a discriminatory result should be avoided.

When once we extend the right to con\est a winding-up petition to workern either on the principle of equity or of adminis- trative law, on the same principle it would logically follow that all others who may have dealings with such as commission agents, selling agents etc. whose contracts with the company are going to be terminated· by reason of its liquidation also have to be allowed to contest the winding-up proceedings. Such a claim is not permis- ' sible. On this question, it may be useful' to refer. to the case of Ex Parle 'Maclure('). In that case a person entered , into an agreement c with an insurance company to act as their agent for five years, and to transact no business except for the company, in consideration of which he was to receive a fixed salary and a!So a commission of IQ. percent, on all business transacted. Before the five years expired the company was wound up·voluntarily. It was held, affirming the D decision of Romilly M.R., that the agent was not entitled to prove against the company· for . the loss of his commission during the remainder of the term of five years. James L.J. said : "I am cleaHy of opinion that the Master of the Rolls was. right..... 11 is the case of a person engaging a servant, and saying, 'I engage you for five • .Years, I will pay yon £ 500. a year for that'period-that. s,um is secured to you-and then, in order· to give you an inducement to carry on the business effectually, properly, and .prudently, I will give you l 0 per cent, ·commission· upon the net profits to be earned by that business. I am of opinion that this was a contract which did not give the servant the right. to determine what the extent of the business was to be. He could not call upon ihe directors to issue new poHcies to accept new premium, or to take new risks, if they were not minded to do it. He could. not say, 'Such a person has brought in a policy of insurance;'.and you must accept that." Because if he had a right to say 'You must carry on .the business'. he would also have a right. to say 'You must carry on the' business in the . usual and proper manner,' and that would be giving a servant the right of controlling tlie ma•ter in the mode· in which he chose to carry on his business. Now, I am quite satisfied that the meaning of the contract was nothing of the kind. It was never intended to ·give the servant·the right C)f dictating as to the extent of business, whether more or less, or nothing, but he sim~ly took the chance of H _(I) (1870] L.R• S Cb. 737.

NATiONAL TBXTiLES. v. P.R. RAMAKRISHNAN (V~nkaiaramiah, 1) .975

the company ·finding it a profitable business and carrying it on. The A I J company had a right to reduec the business to a minimum ; and if . they had a right to reduce it to a minimum, they had a right to reduce it to nothing-as far as h~ was concerned."

It is because of some doubts that" had been expressed earlier about the continuance of the .employment_ of the employees of a B company ordered to be compulsorily wound up that section 445(3} was ·enacted making it clear that the passing of the order of winding- up amounts to a notice of discharge of the employees concerned ~ Section 445(3) c;:orresponds to the termination of service ·brought about by the abolition of a po~t un.d er a Government' or theby closure of a business, neither of which as the Jaw stands today· c requires compliance with· the principJes of natural justice._ . It may, however, attract section . 25-FFF of the Industrial Disputes Act; • 1947 in.appropriate cases.

Jn the Act, there· are specific provisions dealing with th'e · rights D of employees of a company. Sections. 417 to 420 of the Act deal with employees' s~cu(ities and provident funds and 'clauses (b) to (f) of section 530( 1) 'deal with preferential payments to be made to the ~ eJIJployees of a compao.y in liquidation from out of its assets. S~ion 635-B of the Act deals with the protection to which the employees are entitled during investigation into the affairs -of a company. Rule E 152 of the Companies. (Court) Rules, 1 959 (read with Form No. 67) relates to proof of arrears of workmen's wages. The right to resist a wiliding-up i;>etition is not one such right. ,,

It° is .true that public illterest which niay include within its scape interests of employees of a company has to be kept in view F by the Court as observed in Bhalchandra Dharmajee Makaji and Ors. · . v. Alcock, Ashdown ' and Co. Ltd. and· Ors.(1) in exercising certain powers under the Act. S~ctions 388-B, 394, 396, 397 and 408 of the"Act do refer t9 the concept of public interest. The.se ·provisions deal with the power of the Central Government to remove managerial personnel from office on the recommendation :of the High Court. compromises. arrangements and reconstruction of companies and power of the' Court and the ·Government to prevent oppressiop · or a mismanagement of affaits of company. .They do not, liowever, state that trade unions can as of right intervene in the pr0ceedings ~rising under them. H l (1) 42 Company Cases. I~.

·916 SUPREMB COUllT REPORTS (l983l t s.c.a.

A It is not correct to say that there ·is no other remedy at all for workmen who are likely to be affected . by the winding-up . order \_ made by the Court. Section 15-A of ·the Industrial (Development and Regulation) Act, 1951 (Act ~o. 65 of 1.951) which applies to textile industry as well confers power on the Central Government to carry out investigation into the affairs of a company in liquidation. B It reads·:

"15-A. · Power to investigate into the affairs of a company in liquidation-(1) Where a company, owning an industrial un~ertaking is being wound up by or under the '. supervision of the High Couri, and the business of such c company is not being continued, the Central Government may, if it is of opinion that it is necessary, in the interest of the general public and, in particular, in the interests ·of production, supply or distribution of ahicles ·or cl~ss of articles relatable to the concerned scheduled industry, to D investigate into the possibility of running or restarting the industrial undertaking, make an application to the High Court praying for permission to make, , or cause to be made,· an. investigation into such possibility by such per~on or body of persons as that Government iµay appoint for the purpose. E (2) Where an application is made 1by , the .Central Government under sub-sectfon (1), the High Court shall, in notwithstanding anything contained the Companies Act~ 1956 (I of 1956) or in any other law for the time being in force grant the permission prayed for." F , I'

The provisions of Chapters III-AA and lll·AB of the Industrial (Development · and Regulation) Act, 1951 confer on the Central. G~vernment powers regarding management or control of industrial undertakings owned by corupanies in liquid.ati<;>n and power to G provide relief to certain indusfrial undertakings 1including those .to which Chapter III·A is applicable. Chapter III-AC of th.a t Act · deals with the power of the Central Government in respect of liqq,idation and reconstructiQn of companies. Jn particular, section . I 8·FD(I) of that Act inter· a/ia provides that if, i on receipt of the · · report submitted by the authorised person, the CCntral Government ff is satisfied in relation to a company, owning the industrial under• taking, which is being wound up by the High Court, that its ass.. and liabilities are such . that in the ioteres~ of its creditors,

NATIONAL TEXTILES-v. P.R. RAMAKRISHNAN (Venkataramiah, J.) 977

contributories the i_ndustrial undertaking should 1?e solid.as a running ) concern, as provided in· section 18-FE thereof it may by order decide accordingly. Sub-section (2) of section 18-FD of that Act stat_es that notwithstanding anything contained in sub~section (\) thereof the Central Government may prepare a scheme for recons- truction of a company if it is sati.sfied having regard 'to all relevant . circumstances mentioned therein that it is proper to do so . When B such a scheme is prepared, the Central Government bas to send it to the regfatered trade unions, if any, of the employees concerned for their suggestions and objections. (See section 18-FF(3)). Any scheme finally - approved would prevail. notwithstanding · anything contained in sections 391 to 394-A (both inclusive) of the Act. It is open to the workers or their tr!f.de unions to move the Cenfral c Government to take appropriate steps under the aforesaid provisions in order to protect the interests of the workers who are likely to be affected by the winding-up orders. • Article 43A of the Constitution clearly stat.es that the State D shall take steps by suitable legislation or in any ~tber way to secure the participation of workers in the management of undertakings, • establishments or other organisation engaged in- any industry. The High-powered Expert Commit!.; on Comp'!nies and MRTP Acts headed by Justice Ra:jinder Sachar of the Delhi High Court baa also made certain recommendations about provisions to be made. E _) for workers' participation in management of companies. (Vide paragraphs 18.127 to-18.143 of the Report). ·Parliament may take early steps to implement soµie of the recommendations made by the said Committee. It is significant that there is no recommendation made even in this Report al?out the right of trade unions to contest winding-up petitions. If the workers are issued .shares then they F would no doubt be eo'titled to participate in the winding-up proceedings as contributories. This may, be one way of sol viog the problem by legislative means. Another way of providing a forum to the workers' representative in matters relating to·the winding-up ' . of a colllpaoy -is to amend section 292 of the Act as suggested in para 11.27 and para)8.137 of the Report of the Sachar· Committee._ · G Those paragraphs are reproduced below for ready reference : ·

_"11.27 The workers' representation on company Board makes it necessary to provide that companies H must ensure that certain decisions are necessarily taken at the Board level and the Board do not_ delegate

978 SUPREME COUllT REPORTS (1983) I s.c.R.

A the .powers in respect of these matters to committees er other functionaries in the organisation, otherwise the participation of workers at the Board level is likely to prove ineffective. The powers and functions which cannot be delegated by the Board, and which must be within the exclusive jurisdiction of the Board to take

8. policy decision are in respect of the following matters :-

(a) winding-op 6f the company ;

(b) changes in the memorandum and articles of associa- tion ; . c (c) changes in the capital structure of a company (e.g. as regards the relationship between the Board and the shareholders a reduction or increase in the share capital ; as regards the relations between the Board and senior management, the issue of securities on a take- . D over or merger) ;

(d) disposal of a substantial part of the undertaking ;

(e). the allocation or disposition of resources to the extent not covered in (a) tq (d) above ; and (f) the appointment, removal, control and remuneration of management, whether as members of the Board or in their capacity as ~xecutives or employees.

The suggestion regarding (a) to (e) above is on the same line as the present power <if the Board to declare dividend. In other. words, the shareholders will not be able to exercise powers mentioned in (a) to (e) above unless recommended by the Board. We would, therefore, suggest that section 292 be amended to provide for .the exercise of the fore- going powers of the Board of a company .which is required by law to ensure participation of workers in management."

"18.137 Jn order to ensure effective particip_ation by workers' representatives. at the Board level section 292 should be amended to provide that certain decisions are necessarily taken only at the Board level and no delegation to Committees of the Board or to other functionaries is made.''

NATIONAL TEXTILES v. P.R~ RAMAKRISHNAN (Venkataramiah, J.) 979

./; These suggestions emphasise that at present workers have no A ' right to contest winding-up procc_edings.

It is also open to_ Parliament to make a law on• the lines· of sections 63 to 69 of the Employment Protection Act, 197_5 passed . by the Parliament in the United Kingdom to give any additional protection necessary for workmen who are likely to be_ affected B adversely by the winding-up proceedings.. (See Palmer's -Company' Law (22nd Bdn. Vol. I, p. 919)). ·Parliament may also consider the introduction of a provision corresponding to section 74 of the Companies . Act of J980 passed by the British Parliament. Such . steps_ may mitigate any hardship that may be cansed to _the workers as a consequence of the winding-up of a' company. c It ha:s to be emphasised that the privilege of making suggestions to the Court in the public interest is different from the right to be impleaded as a party with the concomitant right to enter into contest with the other parties and of taking an order in appeal before higher courts.· The latter right has fo be conferred expressly D by the statuie on any person who wishes to exercise it._ ~Jnder the. ' existing Jaw, the workers or their unions may make any suggestions to the Court at ~ny stage but they cannot claim to be impleaded as parties to _<he winding-up petition as of right. E _; The decision· of this Court in Fertilizer Corporation Kamgar Union (Regd.), Sindri and Ors. v. Union of India and Ors.(1) does not lend_any support to the case of the trade unions. In that case which attracted the principles of ·administrative law the petitioner trade union pleaded that Article.14; Article 19~1)(g) and Article 311 of the Constitution had been violated by the sale of_ the plant and F equipment of a factory in which its members were · working. Ultimately the petition was dismissed by this Court. ·one of the distinguishing features of that case is that the factory - involved -in that case wa• in the public_. sector and owned by the Government against which a petition under Article 32 of the Constitution was maintainable. Chandrachud C.J. observed in the course of his G i,udgment at pages 60-61 thus :

"Secondly, the right of Petitioners 3 and 4 and of the other workers to carry on the occup11tion of industrial workers is not, in any manner affected by the impugned H (I) [19Sl) 2 S.C.R. 52.

980 SUPREME COURT RllPOR'tS 11983] I s.c.&.

A sale. The righ.t to pursue a calling or to carry on an , occupation is not the same thing as the right to work in • a partfoular post under a contract of employment. If the workers are retrenched consequent upon and on account of the sale, it will be open to them to pursue their rights · ' and remedies under the Industrial laws. But the point to 8 be noted is that the closure of an establishment in which a workman is for the time being employed does not by itself infringe his fundamental right to carry on an occupa- ·. tion which is guaranteed by Article 19(l)(g) of the Constitution. Supposing a law were passed preveniing a certain category of workers from accepting employment in c fertiliser factory, it would be possible to contend then that the workers have been deprived of their right to carry on , an occupation. Even assuming that some of the workers may eventually have to be retrenched in the instant case, it will not be possisble to say that their right to carry on ·an occupation has· been violated. It would be open to D them, though undoubtedly it will not be'Casy, to find out other avenues of employment as industrial workers. Article ·\ J9(1)(g) confers a broad and general right which is available to all persons to do work of any particular kind and of -their choice. It does not confer the right to bold a particular job or to occupy a particular post of one's choice. Even E under Article 311 of the Constitution, the right to continue in service falls with the abolition of the pqst in which the .. ' person is working. The workers in the instant case can no inore complain of the infringement of their fundamental right under Article i9(l)(g) than can a Government servant complain of the termination of his employment on. the abolition· of his post. The choice and freedom of the workers to work as industrial workers is not .affected by the sale. The sale may at the highest affect their locum, but jt does not affect their locus, to work as industrial workers. This is enough unto the day. on Art. 19(l)(g)." G On the question of locus standi of workers to maintain the petition, the learned Chief Justice observed at pages 65-66 thus :

"That disposes of the question as regards the maintain- H ability of. the writ petition. But, we· feel concerned ·to point· out that the maintainability of a writ petition which

.. NATIONAL TEXTILBi .. · P.P. RAMA~RISHNAN (Venkataramiah, J.) 981

is correlate.d to the existence and violation of a fundamental A J ·.right is n6i always t~ be confused with the locus to bring proceedings under Article 32. · These two matters often mingle and coalesce with the result that it becomes difficult to consider them in water-tight compartments. The q·uestion whether a person has the locus to file a pro- ceeding depends mostly and often on whether he possesses B ·a legal right and that right is voilated.. But, in an appro- priate case, it may become necessary in the changing awareness of legal rights and social ·obligations to take a broader view of the question of locus to initiate a pro~eeding, be it under Article 226 or under Article 32' of the Constitution. If public property is dissipated, it would c require a s!rong argument to ·convince the Court that representative segments of the public or at least a section of the public which is dire~tly interested and affected would have no right to complain of the infraction of public duties and ·obligations. Public enterprises are owned by the . people and those who run them are accountable to the D ' people. The accountability of the public sector to the Parliament is i~effective because the . parliamentary control of public enterprises is "diffuse and haphazard". We are ·not too sure if we would have refused reliefto·tbe workers · if we would have found that the sale was unjust. unfair or . mala fide.';· Krishna Iyer, J. in bis concurring opinion observed at pages 70- 71' thus :

"A pragmatic ·approach to social justice compels us to F ·- interpret constitutional provisions, including those like Arts. 3.2 ·and 226, with a view to see that effective policing of the corridors of power is carried out by the court until other ombudsman arrangements-a problem with \,Vhicb Parliament has been wrestling for too long- emerges. I ·.have dwelt at a little· length on this policy aspect and the court process because the learned Attorney General ' challenged the petitioner's locus standi ·either qua worker ·-or qua citizen fo question in court the wrong doings of the public sector although he maintained that what had been ... done by the Corporation was both bO'na fide and correct. · H We certainly agree that judicial interferen~e with the Administration cannot be meti.culous in our Montesquien

982 SUPREME COURT REPORTS [1983] I S.C.R.

A system of separation of powers. The court cannot usurp or abdicate, and the parameters of judicial review must be clearly defined and . never exceeded. If the Directorate 'of a Government company has acted fairly, even if it has faltered in its wisdom, the court cannot, as a super-auditor, take the Board of Directors to task. This function is B limited to testing whether the administrative action has been fair and free from the taint of unreasonableness and has substantially complied with· the norms of procedure set for it by rules, of public administration "

c 'A reading of the aforesaid passages shows that the Court was concerned in that case witb,operations in a public sector cpmpany and the activities of the Government. These observations cannot have any relevance to a case involving the affairs of a company .which is governed only by express provisions of company law and other relevant statutes. D As the Jaw stands today, workers cannot contend that a factory owned by an individual proprietor, on his death, should not be divided amongst bis heirs, even though, they may lose their jobs. They cannot resist a partition suit, in which one of the items of property in respect of which relief is claimed is the factory ia which they are working, filed by a junior member of Hindu joint family against the manager contending that the said factory is the separate property of the manager and should not, therefore, be partitioned merely because they may be discharged from service in the event of the suit being ·decreed. They cannot resist the suit for dissolution of a firm which owns the factory in which they, are working evetf though at the distribution of the assets of the firm, the factory may have to be dismantle i and sold. The position cannot be different in the case of a company which is wound up by the Court. As the law stands today, the workers fo a factory "Wned by a company do not have any hand in the birth of a company, in its working during its existence and also in its death J;y dissolution. If the Jaw expressly says that a memorandum of a company should be signed by some future employees of the company, or that there should be workers'· representatives on its board of directors or that the company should not be wound up without consulting the wishes of \ H the workers, then they can certainly claim all such rights. Workers' *' participation in the affairs of a company or the ushering in of an industrial democracy is quite a laudable object. That is the reason

NATIONAL TBXTILBS v. P.R. RAMAKRISHNAN (Venkafaram°iah, J.) 983

, for enacting Article 43-A of the Constitution which requires the. A State to take steps, by suita/ile legislation or in any other way, to J secure the participation of workers :in the management of under- takings, establishme~ts .or other organisations engage.d in any industry. The Legislature has not taken any concrete steps in this regard. But, can the Court step in .and introduce drastic amend· m.eiJts into the company law? Surely, it cannot. Even though there .B is no express statement in our constitutional law incorporating in it the doctrine of s.eparation of powers, in the interpretation of the Constitution this Court has broadly adopted the said doctrine. (See Smt. Indira Nehru Gandhi v. Shri Raj Narain ('). Even though by virtue ot' its power of interpretation of law ·the Court in an indirect way is making law, it should be stated that there are well recognised· c . .limitations on" the power of the Court making inroads into the legitimate domain of the Legislature. If the Legislature exceeds its power, this Court steps in .. ,If the Executive exceeds its power, then also this Court steps in. If tliis Court exceeds its power, what can people do ? Should they be driven to seek an amendment of the law on every such occasion ? The only proper solution is the observance of restraint by this Court in its pronouncements so that • they do not go beyond its own l.egitimate sphere .

It is true that there are now new kinds of weapons lik.e consumers' protection agitations against big companies whose activities are likely to affect the life of the community adversely. But, for those agitations to be effective the Legislature should wake up and make appropriate laws under which the consumers can bring action against erring companies. In the absence of any ·such law, this Court cannot issue directions to the companies on the basis of _complaints from the members of the public. F There are several areas where it is necessary for the Legislature to make law. A reading of the provisions in Part IV of the Consti- _tution shows that rriany of them are still to be implemented by the passing of appropriate legislation. Article 41 of the Constitution dealing with the right to work, Article 43 dealing with living G. wages· etc ..for workers,. Article 44 which insists upon the introduc- ' #on of a uniform civil code for all citizens and Article 47 dealing with the duty of' the State" to raise the level of nutrition and the standard of living of the people aro some of the articles which have ! to be implemented either by the Legislature or by the Executive:

(I) (1976Jl2 S.C.R. 347.

'.984 SUPREME COURT REPORTS (1983] I S.C.R.

A Would this Court compel the Executive by issuing a writ to implement the policy underlying Article 41, Article 43 and Article 47 without being backed up by necessary laws? Would this Court enforce a uniform civil code in respect of all citizens, without the aid of an appropriate legislation even though the concept of equality· is enshrined in the Constitution and Article 44 specifically requires B the State to endeavour to secure for ·all citizens a uniform civil code? It may not do so Tlie only solution for many of these social problems is to appeal to the appropriate organs of the State to do their assigned job in the best interests of the Community. It • is wrong to think that by some strained construction of law, the Court can find solution to all problems. c In this very case, when arguments were going on [ suggested that it may be appropriate to issue notice to the Company Law · Administration of the Union of India so that the Court could have. the benefit of the views of the Government.· It was not, however, acceded to.by the majority. The presence of the Union Government in the present case as a party might have brought to its attention the need for initiating necessary 'legislation, if it really fdt that it was advisable to do so, for providing an opportunity to workers of a company also to contest. the winding-up proceedings. It is, how~ ever, a· matter for regret that no tangible steps ·appear to have been taken to amend the Act even though the Sachar Com.mittee Report • which contains many recommendations· which when implemented would make the'· companies. which are centres of economic power accountable to the' society at large and make them fall in line with the current views on thei.r · social responsibilities, was forwarded to the Government more than four years ago. F

It may be that the employees or their trade unions are interest- ed in requesting the Court to dispose of the factory a• going conern so that their rmploymen t may not be '!ffected. How are they interested in supporting one set of directors against whom charges G of waste, misappropriation and mismanagement are made by the other set who are alleged to have b~n totally excluded from ' management by attempts amounting to oppression ? Ii1 the instant case the trade unions concerned have filed almost a common state- \ H ment containing their grounds of objection ,:along with their notice to appear in the proceedings filed under Rule 34 of the Companies (Court) Rules 1959 p1muant to the· advertisement issued by the

NATIONAL TEXTILES v. F.R. RAMAKRISHNAN (Venkataramiah, J.) 985.

Court. The grounds of objection filed by the Coimbatore District A National Textile Employees' Union are set out below in extenso :

''1. That the Company Petition is not maintainable under the Companies Act, 1956, hereinafter referred to as the 'Act'. B

2. That no case bas been made out by the petitioners under section 433(f) of the Act.

3. That, on the facts and circumstances of the case, it is not just and equitable that the company should ·be ·~ wound up. c

4Copy pinpoint4. That another remedy is available to the petitioners and hence the Comp.any cannot be wound up by virtue ·.Of section 443(2) of the Act.

5Copy pinpoint5. That the objector craves leave to reserve his right' to amplify and elaborate the above grounds · in the counter affidavit io be filed to·the company petition."

It is seen from the foregoing that the trade unions are only interested in supporting the cause.of the respondents against whom allegations are made by the petitioners in the Company Petition by making certain general submissions, without traversing the various allegations made in it. The respondents who are already on record and who are. actually contesting the petition are! capable of· looking after their interests and need not rely upon the support of the trade unions who are neither creditors nor contiibutories and· who do not know the details of the internal administration of the affairs of the Company. The petitioners in the Company Petition would be in a more disadvantageous position if they have to face the opposi- tion of the trade unions also. Such a situation should not be created by extending the area of controversy by a liberal interpretation of the provisions of law when there are no compelling reasons to do so.

The High Court has in this case passed necessary orders in order to protect the interests of the employees in Company Appli- 7 cation No. 844 of 1981 and in C.M.P. No. 11159 of 1981. The. order passed in Company Application No. 844 qf 198\ is already set H out above.

986 SUPREME COURT REPORTS (1983] I S.C.R.

A In C.M.P. No. 11159 of 1981 the High Court has passed the following order :-

"This is a petition filed by the appellants in O.S.A. No. 128 of 1981 for permitting the first appellant/company to raise with its Bankers viz., Bank of Baroda, .Coimbatore, · B a temporary loan of an amount not exceeding Rs. 5,25,000 for the purpose of paying bonus to the workers of Jothi Mills, as per the Memorandum of setllement entered into. between the Company and its work_eis under section 18( 1) of the Industrial Disputes Act, 1947 on 10.I0.1979 by pledging or charging the assets of the Company .............. . c Though in form the appellanti; have prayed for raising of a loan for honouring the commitment of Rs. 5,25.000 towards bonus for 1he workers of Jothi Mills by pledging or charging the assets of the company during the argument the learned counsel for the appellants was willing to avail of the existing.facilitie' in the Central Bank as provided in the order Itself. Though for av.ailing the existing bank facilities there is no need for any specific direction from • this Court as the order appealed against itself gives such liberty, the learned counsel for the appellants by way of abundant caution requires such an interim dire~tion in this petition. The learned counsel for the respondents pointed out that availing of the existing facilities ,_ referred to in the order of Shanmukhan, J., is a facility that was available as on 13.7.1981 we think the learned counsel for the respondents is well-founded in this con- tenlion. (sic) But even so if the Banks as on 13.7.1981 the petitioners are entitled to avail the same in order to honour the commitment relating to 'bonus for workers. Since the order under appeal itself permits the petitioners to avail of the existing Bank facilities with any of its Bank though the application in form asked for raising of the ioan with the Bank of Baroda, Coimbalore, we make it clear that it is open to the petitioners to avail of the Bank loan facilities with the Central Bank within the limits prescribed as on 13.7.1981. This is the only clarification that need be given in this petition and no further orders are necessary." (emphasis added) \- H These orders show that the High Court has kept in ·its view the interests of worl<er~ wll!le Bivin1:1 directions in the ease from

NATIONAL TEXTILES v. p R. RAMAKRISHNAN (Venkqtaramiah, J.) 987

/ time to time and that there is no longer any ground to complain A about. According to the· petitioners in the winding-up petition the occasion for the complaint of the workers had been cleverly engineered · by the contesting respobdents. Bethat as it may, as the orders .,f the High Court stand today the workers can always approach it by way of a company application for appropriate orders whenever ·they.feel that their working conditions are adversely affected during 8 the pen.dency of the proceedings. It is not necessary that the workers or the trade unions should .be impleaded. as parties to the Company Petitio~ enabling them to contest the winding-up petition. Their pn:sence on record is not necessary for complete and effectual adjudication of the winding-up petition. The trade unions are, therefore, neither. necessary nor proper parties to the winding-up . c petition on the facts and in the circumstances.of this case including the element of public interest involved in any liquidation proceeding.

Before concluding it should be stated that it is not correct to bold that the order of the High Court 'smacks of elitism' or 'sounds .like a relic of feudal age' or is an 'obnoxious' one. The High Court D has decided the case in accordance with the prevailing view in the country. No case in which a different view is taken. is cited before us. Nobody disputes the proposition that law should not be static. It should no doubt grow but it should have its legitimate birth and in a case like this in the precincts of the Legislature. It should be the result E of the exercise of legislative judgment, particularly when a departure from express provisions of a statute or an established practice is to be made, Judges are not expected to know all aspects of every such matter. A discussion involving a comprehensive view of all !nterests which are likely to be effected by any decision ·which makes a ·serious departure from a well-settled principle of law would not take place ll' before a court where only the parties to a case or their lawyers are heard. Members of the public also would not know· what· is hap- pening in courts. The publicity which a proceedi~g in the Legislature would receive is not given to the proceedings in Court. Even the · elected representatives of the people who are charged with the duty of making laws may not know what is happening in a court of law. G Therefore, it is aiways better to leave such matters t~ the decision' of the Legislature, instead of the court, sometimes by a majority of . . one assummg power to make a new law. '

It is no doubt true that the view of the High Court is also in H conformity with the view prevailing in England,. That does not mean that the High Court has s11rrendered its judgment to a foreign

988 SUPREME COURT REPORTS 11983] I s.c.•.

A practice, because that is ·the very view which is being followed till now in the Indian courts. We should not forget that the very con- cept of company law is foreign to our country. It origninated in Great Britain and our company law contained in successive Acts passed by the ·Indian Legislature is modelled on British Jaw and experience. There is a large body of company juri,pruden~e which 8 is common to all the Commonwealth countries. There may, how- ever, be some local changes but the pattern appears to be common. The practice of relying on foreign decisions whatever may be their age only when they are in conformity with what we wish to hold and of condemning them only on the ground that they are ancient foreign decisions when they do not accord with our views is not ..... -- correct. A foreign decision (even though it may not be binding) · ~ is either worthy of acceptance or not depending upon the reasons contained in it and not on its.origin or age. There is no reason why we should not follow a well reasoned forei go decision unless it ' is opposed to our ethics, tradition and jurisprudence or otherwise unsuited to Indian conditions. Can we say that the law of habeas D corpus which has found its way into India from England is bad only because if came frnm a foreign country or bas an ancient origin ? The writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari referred to in Art. 32 and Art. 226 of the Constitution of India, ther ule of promissory estoppel, the principle of audi alterum partem and many other pripciples which are applied by the Indian courts are all of foreign origin. Even the socialist prinCiple is not entirely of Indian origin. It is difficult to shut our eyes to realities of life. : Moreover, it is difficult even though it may not be impossible Y to administer . the company Jaw as it is now in force in India without / . the aid of the principles laid down by some of the leading English cases like Salomon v. Salomon & Co.( 1) laying down the principle of corporate personality, Ashbury Railway Carriage & Iron Co. v. Riche(') dealing with the rule of ultra vires, Royal British Bank v. Turguand(') laying down the rule of 'indoor management", Hedley G Byrne & Co. Ltd. v. Heller & Partners Ltd.(') which establishes the liability for negligent mis-statements in prospectuses, Foss v.

\ (1) f.1897] A,C. 22. ff (2) (1875] L.R. 7 H.L. 653. (3) [1856] 6 E & B 327 (Exch., Ch.) (4) [1964] A. C. 465.

NATIONAL TEXTILES v. P.R. RAMAKRiSHNAN (Baharu/ Islam, l) 98<i

Harbottle(') and Burland v. Earle(') dealing with the principle of A 'the fraud on a minority' and Ebrahimi v. Westbo~rne Galleries(') dealing with the application of the 'just and equitable' principle in ordering the winding-up of a company. A reading of the decision of this Court in Needle Industries (lndia) Ltd. & Ors. v. Needle Industries Newey (India) Holding Ltd. & Ors.(') rendered by Chandrachud, C.J. shows the importance of foreign decisions in deciding case arising B under thi: Indian Company law which out of necessity bas to keep pace with the well established Principles prevailing in many other parts of the world for sustaining international trade and commerce. Adoption of an universal system of mercantile law and obedience to the conventions of the International Labour Organisation con- stitute two important compulsions of modern international economic c ts ·fife. It may be that the workers who are likely to be affected by the winding-up need a larger protection. Th.at can be done only by legi~lative action. This Court cannot, however, make any order· ' which will conflict with the existing law.

Io the result the appeals fail and are dismissed. No costs . D. • BAHARUL !SLAM, J. I have carefully read· the judgments prepared and orders proposed by my Brothers Bhagwati and Venkataramiah JJ. I entirely agree with Bb.agwati J. and regret my inability to agree with Venkataramiah J. Any provision of any E statute has. to be interpreted. keeping in view the letter and spirit of the Constitution. Any interpretation that is not in consonance with the letter and spirit of the Constitution is obnoxious and unacceptable. - ·1n tb.e winding-up proceedings in question, the National Textile F Workers' Union filed the petition before the High Court witb. a prayer to be heard before any order for winding-up was passed. The reason was the workers' apprehension of termination of their services in case of winding up of the Company. It is true, tb.ere is no express provision in the Companies Act giving the workers any right to be beard in a winding up proceeding before the Court. There is no G express bar either. · Learned counsel for Respondents Nos. 6 to 9, in support of his contention that the workers bad no right to be

/ (!) [1843) 2 Hare 461. (2) [1902] A.C. 83. B (3) [1973) A.C. 360, (4> [1981J 3 s.c.R. 698.

990 SUPREME COURT REPORTS [1983] I S.C.R'

A heard in a winding up proceeding, cited Halsbury's Laws of England, volume 7 page 614 para 1028 (4th Edition). The learned author has stated the law on the subject thus :

"Only the petitioner, the Company and creditors and. contributories are entitled to appear on the. petition ; other parties have no right to be heard, and even if the Court at the first instance elects to hear them as amici curiae, they have no right of appeal."

This statement of the law has been made on the authority of the judgment in Bradford Navigation Co. rendered as early as 1870 : c (1970) 5 Ch. A, Page 600).

Learned counsel also cited Palmer Company Precedents (17th Edition) Vol. 2, page 77, in which the law to the above effect was stated. Learned counsel has submitted that the Company Law in • India is the same as in the Company Law in England. The· 1aw D cited may be good law for England with altogether a different system of economy ; but is abhorent to India,_ p9.rticularly. after the Constitution (42nd Amendment) Act, 1976, by which the "Socialist" and "Secular" concepts have been added and incorporated into the Preamble of our Constitution. Our 'Democratic Republic' is no longer merely 'Sovereign' but is also 'Socialist' and 'S_ecular'. A E Democratic Republic is not Socialist if in such a Republic the workers have no voice at all. Our Constitution has expressly rejected the old doctrine of the employers' right to 'hire and fire'. The workers are no longer ciphers ; they have been given ·pride of place in our economic system. The workers' right to be heard in a winding-up proceeding has to be spelt out from _the Preamble and Articles 38 and 43-A of the _Constitution and from the general principles of natural justice.

AMARENDRA NATH SEN, J. I have read the judgment of my learned brother Bhagwati, J. and also the judgment of my learned brother:venkataramiah, J. I cannot persuade myself to agree with the judgment of my learned brother Bhagwati, J. -I agree with the judgment and order proposed by my learned brother Venkataramiah, J. I shall indicate my .reasons for the view (hat I have taken.

H \ The material facts of this case have been set out in the juagment of my learned brother Bhagwati J. and also in the judgment of my learned brother Venkataramiah, J. The arguments advanced

NATIONAL TEXLILES V, P.R. RRMAKIUSHNAN 991 (Amarendra Nath Sen, J.)

from the Bar have been considered by both of them. It does not, therefore, become necessary for me to reproduce them in this judgment.

Whether the employees of, a Company in their capacity as employees can claim as a matter of right to appear and be heard in B a petition presented to court for the winding-up of the Company, is the question for decision in this case. · ·

The right of an employee in his capacity as such to be beard in a proceeding for winding-up of a company has been canvassed as a proposition of law. The contention urged oil behalf of the trade unions representing the workers. of the company is that whenever a c petition is presented to a Court for the winding up of a company, the employees of the compa~y have the right to appear and be heard , in the said pr0ceeding. The principal argument advanced on behalf of the trad.; unions representing the workers is that the employees of a company are D equal partners of the management of the company, if not the more important one, and the company, in view of the socio-economic role it plays and it has to play in the country, can no longer be consider- ed to be the concern of the members of the company. Further, the argument is that the employees very maierially contribute to the E. working of a company and help the company in effectively playing its socio·1~conomic role and promoting the interests not only of the company, but also the larger interests of the nation and an order of winding up seriously affects the interest of the empl~yees, virtually •'-. taking away the means of their· livelihood. It has been submitted that as an order of winding up of the company affects so seriously \ F ''- the interests of the emplc>yees, the employees must have a say and ~ ·must be beard in a proceeding for winding up before the Court. ·

I have earlier observed that the arguments· advanced from the Bar on behalf of the trade unions have been noted at length by my learned brothers Bbagwati and Venkataramiah, JJ. The arguments no doubt express noble sentiments which I share ; but, in my opinion, the arguments fail to establish that the employees have a right to appear and be heard in a petition presented to a Court for the winding up of a company. If the right is to be conceded to / employees on these· grounds it must logically follow that every employee of a company, whether he is a wo.rker within the meaning of the Industrial Disputes Act or he is a member of the management

SUPREME COURT REP<lRTS [l9S3j i s.c.R

A staff, must enjoy the same right to appear and be beard in every such proceeding for the winding up of the company. An order for winding up affects all the employees of a company, whether they are workers belonging to any trade union or not or whether they are officers of the company, high or low, not being members of any union or association. Further if the right to participate in a winding B up proceeding is to be judged from the view point of the interest of any party who may be prejudicially affected as a result of an ~ order of winding UP. being made, various other parties .who have trade relations with the company must necessarily be held to have the same right to be beard in a winding up proceeding. It is common knowledge that various persons,· apart from the employees of the c company, also depend for their survival on the supplies of various materials, ingredients and components to the company and with the.liquidation of a company, all such persons who are· making their living out of their dealings with the company have to go without occupation and have to face disaster. Persons having existing ' contracts with the company are also seriously prejudiced when an order of winding up of the company is made.

If the test of injury and adversely affecting tlle interests are ·• consid~red to be sufficient to entitle a party· to a hearing in a pro- ceeding on the footing that they are persons aggrieved, no. suit for dissolution of a partnership can also be decided without impleading the employees of the Jirm and various other parties having trade relations with the firm, ~s the dissolution of a firm may ·prejudicially affect the interests of the employees or the various other persons dealing with the firm.

It has to be borne in mind that a company can only be wound up in accordance with ihe provisions of the Indian Companies Act. The right to have a company wound up is a right created by the Statute. The entire procee\!ing in relation to the winding up of a company is regulated by the statute, namely, the Indian Companies Act (hereinafter referred to as the Act) and the procedure to be followed is further supplemented by the provisions· .contained inJthe rules made under the Act known as the Companies (Court) Rules, , 1959 (hereinafter referred to as the Rules).

The various modes of winding up of the company, under \ H what circumstances a company may be wound up by Court and who are the persons competent to present a petition ·to Court for the winding up of the company and who are the persons entitled to

· NATiONAL TEXTILES v. P.R. RAMAKRISHNAN 993 (Amarendra Nath Sen, J.) A be beard c;m such a petition, are provided for in the Act and in the Rules.

Xt has to be borne in mind that apari from the right of the Court to order the winding up of a company in an appropriate case, the Act recognises that a company may go into liquidation without B any intervention by the Court and also· under the supervision of Court, provided the necessary conditions laid down in the Act in this regard are complied with. · Where the Company goes into liquidation without reference to court or under the supervisiou of the Court, the employees of the company who have to meet the same fate of losing.their employment, as and when the coiiipany is c wound up by the Court, do not and cannot have any voice or say in the procedure to be adopted for the liquidation of the company.

In the case of winding up of any company by Court, the parties who can move the Court for winding up of !he company are specifically mentioned in the Act and only such persons are competent to present the winding up petition. The procedure to . be followed on such a petition for windin·g up of the company being presented to court a.nd the parties who are entitled to be heard on the petition are dealt with and provided for in the Act and the Rules. The right of appearance and of being heard. in a winding up proceeding has been conferred on persons whom the Legislature considered to be necessary or proper parties for effective adjudication of the ·proceeding before the Court. The Act provides that a creditor to . whom a company is indebted in a sum exceeding Rs. 500 and whose debt has not been paid by the company notwithstanding the statutory notice being served on the company is entitled to present a petition for the winding up of the company and in such a case, the creditor whose debt cannot be properly disputed, is entitled to an order of winding up on the ground of insolvency of the company. If a company is commercially insolvent and is unable to pay its debts, the company has necessarily to be wound up and the employees of the company can have hardly anything to say in such a case for assisting the Court in deciding the matter. G

My learned brother Venkataramiah, J. has· referred to the various provisions of the Act and also to relevant Rules, which go ? to !ndicate that no such right of the employees to appear and parti-. H cipate in a winding up proceeding is recognised. Rule 34 of the Rules on which strong reliance was placed by the learned counsel

994 SUl>REME COURT REPORTS [l 9S~ l I s.c.R.. • A appearing on behalf of the trade unions, is not of any assistance. The said Rule reads as follows :- \~

"Every person, who intends to appear at the hearing of a petition, whether to support or oppose the petition, shall serve on the petitioner or his advocate, notice of his B intention at the address given in the advertisement. The notice shall contain the address of such person, and be signed by him or his advocate, and same as otherwise pro- vided by these rules shall be served (or if sent by post, shall be posted in such time as to reach the addresse) not later than two days previous to the day of hearing, and in the c cas~ of a petition for winding up not later than five days previous to the day of hearing. Such ·notice shall be in Form No. 9, with such variations as the circumstances may require, and where· such person intends to oppose the petition, the grounds of his opposition or a copy of bis D affidavit if any, shall be furnished along with the notice. Any person who has failed to comply with this rule shall not except with the leave of the Judge, be allowed to appear at the bearing of the petition."

This particular Rule appears in Part I and in Part I of the Rules, E general provisions are made. This Rule only lays down the procedure to be followed by any person who intends to be beard at the hearing of a petition, whether to support or oppose the petition, and this Rule does not deal with the competence or right of any particular person to appear at the hearing of. any petition nor does this rule create any right in any person. Part III of the Rules makes specific provisions· F with regard to winding up by Court. Rule 9B in Part III reads :- y "Every contributory or creditor of the company shall be entitled to be furnished by the petitioner or by bis advocate with a copy of the petition within 24 hours of his requiring · the same on payment of the prescribed charges." G For properly and effectively. adjudicating upon any winding-up ' petition, the parties must necessarily know the grounds contained in the petition on which the Court has been moved for · the winding- up of the company to make representation with regard to the same. H Rule 9B requires that copies of the petition in terms of the said rules are to be furnished to every contributory or creditor of the company and the said rule makes no mention of the ·employees of

NATIONAL TEXTILES V, P.R. ~AMAKAISHNAN 995 (Amarendra Nath Sen, J.). A the company. I agree with my-brother . Venkataramiah, J. that - ori a proper consideration of the relevant provisions of the Act and also of the Rules, an employee of a company in his capacity as such does not have any right to appear and be heard in a petition presented. to Court for the winding-up of the company. · It will be noticed on an analysis of the provisions of the Act that from the stage of the B formation of the company till the very last stage of its dissolution, company jurisprudence does not recognise any right of an employee in his capa~ity as an employi!e of the company in the matter of formation of the company, its functioning and its ultimate / winding-up. c The Act, howe_ver, makes necessary provisions as to deposit of employees' security monies with a Scheduled Bank in S. 417 of the Act. The Act also makes suitable- provision in Section 418 about Provident Funds of Employees. Necessary provisions for preferen- tial payment of wages or salary of an employee in case of winding- 0 up of a company have been made in Section 530 of the Act. For safeguarding what the Legislature considers to be public interest, the Legislature in various sections' of the Act has made suitable pro- visions casting various obligations on the company with penal con- sequences and has conferred powers on the Government.

The introduction of Art. 43A in the Constitution which reads--"The St_ate shall take steps, by suitable legislation or in any - other way, to secure the participation of workers in the management of undertakings, establishments or other organisations· engaged in any industry"-does not affect the position in any way. Participation in the management of a company does not by itself create any right F - in any such person to appear and be heard in a windfng-up petition. Unless otherwise named personally as a party to a winding:up petition, no person merely on the ground that he happens to be in the mana- gement of the com pay is entiHed as a matter of right to appear and he heard in a winding-up proceeding. Persons in mariagement of the company may, if they are so authorised, appear and participate in G a winding up proceeding on behalf of the company and representing the company. They will, however, be entitled to appear if they are members or creditors of the company in such capacities, but not / as members of the management. A director of a company must of necessity be a member of the company, as provided in the Act. H

996 SUPREME COURT REPORTS [1983] I s.C.ff,

A It is worth mentioning that the Indian Companies Act is based on the English Companies Act and both the Acts contain more or \ '<> . less similar provisions. The provisions of the Indian Companies Act with "regard to the winding-up Cf the Company are almost alike to the provisions contained in the English Companies Act. As early as 1870 the English Court in Re : Bradford Navigation Co.( 1) held B on a consideration of the provision of the English Act that no person bad a right to be heard against a petition for winding-up of a company except creditors and contributories. It is no doubt true that this decision, still holds good and IB considered to be good law, as will be evident froiµ the comments in authoritative text books on the subject. In Halsbury's Laws of England (4th Edn.), Vol. •VII at c p. 614, it has been !aid down-"Only the petitioners, the company, ·and creditors and contributories are entitled to appear ·on the peti- tion; other parties have no right to be heard, and, even if the Court of first instance elects to hear them as amici curiea, they have no right of appeal." In Palmer's Company Precedents (7th Eda), Part II, the following observations appear at p. 77 :- D y "Any creditor or shareholder may appear to support or oppose the petition. But no one else can do so, even if he has an indirect interest in the continued existence of the company." E On the basis of the decision in Re : Bradford Navigation Co. (supra), the following comments have been made at p. 546 in Buckley on the Companies Act, 14th Edn. Vol. I:-

"The only persons entitled to be beard are the company, the creditors and contributories. The Court may, in its discretion bear other persons who have an interest in order to Jea'rn what public grounds there are in favour of, or in opposition to, the winding up but such persons can be heard only as amici curiae, and cannot appeal."

G Various legislations for the benefit and welfare of the employees have since been passed in England and the Company Act in England also did undergo various changes from time to time. The employees of a company in England are affected in the same way as the employees of a company in India when an H (I) [1870] S Ch. App. 600.