NATIONAL TEXTILE WORKERS UNION Vs. P R RAMAKRISHNAN

JUDGEMENT

(1.) THESE three appeals by special leave raise a short but interesting question of law relating to the right of workmen employed in a company to appear and oppose a petition for winding up of the company. The controversy between the parties arises out of a petition for winding up a private limited company called Ramakrishna Industries (P.) Limited (herein- after referred to as a company). The Company has three units, one a textile mill in the name of Jotie Mills which employs about 500 workmen, another, a workshop for manufacture of textile and other machinery which employs about 400 workmen and the third a printing press which brings out a Tamil daily, called "Nav India' and employs about 100 workmen. It is a closed company in which there are two groups of shareholders, one group consisting of respondents Nos. 1 to 5. and the other consisting of respondents Nos. 7 to 14. Respondents Nos. 1 to 5 hold 608 shares and respondents Nos. 7 to 14, 687 shares while the remaining 300 shares belong to a Trust in which both the groups are equally represented on the Board of Trustees. It appears that a serious dispute arose between respondents Nos. 1 to 5 on the one hand and respondents Nos. 7 to 14, on the other in regard to the management of the affairs of the Company and since the dispute could not be settled amicably, respondents Nos. 1 to 5 filed a petition for winding up the Company on two grounds set out in Clauses (e) and (f) of Section 433 of the Companies Act, 1956. One ground was that the Company is unable to pay its debts and the other was that it is just and equitable that the Company should be wound up. The winding up petition was filed by respondents Nos. 1 to 5 not only as contributories but also as creditors. of the Company. Immediately on filing the winding up petition on 13/07/1981, respondents Nos. 1 to 5 submitted an application, being company application No. 844 of 1981, for an interim injunction and on this application, an ex parte order was made by the learned Company judge restraining the company which was respondent No. 6 in the winding up petition as also respondents Nos. 7 to 14 from borrowing any monies from banks, financial institutions or others without the prior permission of the Court and from alienating and / or creating any charge or encumbrance over any of the assets of the Company in its various enterprises. The immediate consequence of this ex parte order of injunction was that the Jotie Mills Employees Co-operative Store stopped issuing any provisions or supplies to the workmen from 18th July, 1981 and the workmen were also unable from 23/07/1981 to enjoy the benefits under the Employees' State Insurance Scheme. The workmen also apprehended that on account of the ex parte order of injunction, they may not be We to get their wages which were due to be paid on 7/08/1981. Now some of the workmen were members of the National Textile Workers Union, some others were members of the Coimbatore District National Textile Employees Union while still some others were members of the Coimbatore District Engineering Workers' Union. The Coimbatore- District National Textile Employees Union with a view to protecting the interests of its members made an application, being company application No. 880/81 on 28/07/1981 for impleading itself as a respondent. The Coimbatore District Engineering Workers Union also made a similar application to the Company Judge on the same day, being Company Application No. 881 of 1981. So also the National Textile Workers Union made an application, being company application No. 883 of 1981, to the Company Judge on 29/07/1981 praying that it may be permitted to intervene in the winding up petition and that the ex parte order of injunction may be vacated. Respondents Nos. 1 to 5 filed their affidavit in reply to these three applications and the principal contention raised by them was that the National Textile Workers Union, the Coimbatore District National Textile Employees Union and the Coimbatore District Engineering Workers Union had no locus standi to appear and oppose the winding up petition, since the workmen who were members of these three unions were neither creditors nor contributories of the Company. THESE three applications came up for hearing before the Company Judge and after hearing full arguments on both sides, the Company Judge made an order dated 14/09/1981 rejecting all the three applications on the ground that under the Companies Act, 1956, the workmen had no right either to get impleaded in the winding up petition or even to intervene in the winding up petition. The Company Judge followed the decision of a single Judge of the Bombay High Court in In re Edward Textiles Limited, (1968) 38 Com Cas 284 in taking this view. The Company Judge conceded and this concession had to be made because of the observations of this Court in Fertilizer Corporation Kamgar Union v. Union of India, (1981) 2 SCR 52 and of the High Court of Bombay in bhalchandra Dharmaji Makaji v. Alcock Ashdown and Co. Ltd., (1972) 42 Com Cas 190 : (1973 Tax LR 1768), that the factors to be taken into, account by the Court while disposing of a winding up petition would include the interest of the workmen of the company, but observed that "the duty of the Court to consider the interest of the worker of the company would not create a right in such workers to intervene in the absence of express provision in the Companies Act and in the teeth of such right specifically conferred only on the creditors and contributories." The National Textile Workers Union thereupon preferred an appeal before a Division Bench of the High Court but the Division Bench also took the same view and held that though it was undoubtedly true that while disposing of a winding up petition preferred on the ground that it is just and equitable to wind up the company, the Court must consider the interest of the workmen, it does not mean "that everybody who is remotely interested in the company can file an application to implead himself as a party in the petition for winding up" and "merely because in considering the question whether to wind up or not the Court has also to take the larger point of public interest including that of the workers into consideration, it will not clothe the Unions with any locus standi to file applications for impleading themselves as parties or to be heard in the company petition." The Division Bench accordingly rejected the appeal and this led to the filing of Special Leave Petition No. 9661 of 1961 in this Court by the National Textile Workers Union. The Coimbatore District National Textile Employees Union. and the Coimbatore District Engineering Workers Union did not prefer any appeal against the judgment of the Company Judge before the Division Bench of the High Court but they preferred Special Leave Petitions Nos. 10248 and 10249 of 1981 directly in this Court against the judgment of the Company Judge. We issued notice on all the three Special Leave Petitions and when the respondents appeared before us, we intimated to them that we will dispose of the entire controversy between the parties on the Special Leave Petitions and that is how full and detailed arguments were advanced before us at the hearing of the Special Leave Petitions. We now proceed to dispose of these cases after granting special leave to appeal in each of the three special leave petitions.

(2.) BEFORE we proceed to discuss the basic and vital question that arises for consideration in these appeals, it is necessary to set out a few further facts which may have some bearing on the final relief to be granted by us. On the same day on which respondents Nos. 1 to 5 filed the winding up petition and applied for interim injunction, they also made an application, being Company Application No. 843 of 1981, praying for appointment of Provisional Liquidator of the company. Respondents Nos. 6 to 14 appeared at the time when this application was presented and asked for time to file their affidavit in reply and time was granted by the Company Judge up to 10/08/1981. Respondents Nos. 6 to 14 thereafter filed an affidavit in reply on 10/08/1981 and after hearing both sides in a bitterly contested argument, the Company Judge made an order on 7/12/1981 appointing the official liquidator as Provisional Liquidator of the Company. The workmen represented by the National Textile Workers' Union, the Coimbatore District National Textiles Employees Union and the Coimbatore District Engineering Workers' Union did not have an opportunity of being heard before the order appointing Provisional Liquidator was passed by the Company Judge, because as pointed out above, their applications for impleading themselves as parties in the winding up petition or in any event, for being allowed to intervene in the winding up petitions were rejected by the Company judge on 14/09/1981 and this rejection was confirmed by the Division Bench of the High Court on 30/09/1981. The result was that the order appointing Provisional Liquidator of the company came to be made by the Company Judge without any opportunity being given to the workmen represented by these three Unions to appear and show cause against the making of such order. It may be pointed out that the order appointing Provisional Liquidator was stayed for some time by the Division Bench of the High Court in as appeal preferred by respondents Nos.. 6 to 14 but the application for stay was ultimately dismissed by the Division Bench and the Official Liquidator immediately thereafter took charge of the affairs of the company.

(3.) IT is now accepted on all hands, even in predominantly capitalist countries, that a company is not property. The traditional view that the company is the property of the shareholders is now an exploded myth. There was a time when a group controlling the majority of shares in a company used to say : "This is our concern. We can do what we like with it." The ownership of the concern was identified with those who brought in capital. That was the outcome of the property-minded capitalistic society in which the concept of company originated. But this view can no longer be regarded as valid in the light of the changing socio-economic concepts and values. Today social scientists and thinkers regard a company as a living, vital and dynamic, social organism with firm and deep rooted affiliations with the rest of the community in which it functions. IT would be wrong to look upon it as something belonging to the shareholders. IT is true that the shareholders bring capital, but capital is not enough. IT is only one of the factors which contributes to the production of national wealth. There is another equally, if not more, important factor of production and that is labour. Then there are the financial institutions and depositors, who provide the additional finance required for production and lastly, there are the consumers and the rest of the members of the community who are vitally interested in the product manufactured in the concern. Then how can it be said that capital, which is only one of the factors of production, should be regarded as owner having an exclusive dominion over the concern, as if the concern belongs to it ? A company, according to the new socio-economic thinking, is a social institution having duties and responsibilities towards the community in which it functions. The Supreme Court pointed out, as far back as 1950 in Charanjitlal v. Union of India :