KRISHNA IYER Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) A shareholder in a company which is in liquidation under an order passed by this court is the appellant. The Official Liquidator of the company appears as the respondent, through his learned counsel Mr. Kuruvilla. The Company was interested in salt pans in the vicinity of Nagercoil. O.P. 3/1116 was presented for the winding up of that company. That application seems to have been transferred from the District Court, Nagercoil to the file of the erstwhile Travancore High Court and re-numbered as O.P. 1 of 1122. A single Judge of the erstwhile Travancore High Court dismissed that O.P. on 9.7.1948. There was an appeal presented to the appellate side of the erstwhile Travancore High Court from this decision. The appeal was filed on 25.12.1123 accompanied with a petition for stay. The directors by their learned counsel took notice of that application and stay of proceedings was ordered. The judgment in the appeal was delivered on 23.4.1124 corresponding to 8th December 1948. In the meantime on 30.12.1123 the directors of the company had passed a resolution sanctioning a bonus of six months salary to every employee of the company. The total amount calculated on this basis would come to Rs. 10,812. It will be seen that this resolution was passed subsequent to the filing of the appeal and the order staying proceedings. The Official Liquidator of the company made an application to the District Court of Nagercoil to which the case was transferred by the erstwhile Travancore High Court for supervising proceedings in liquidation praying that the resolution passed by the directors sanctioning a bonus to the employees may be given effect to and the employees may be recognised as creditors of the company entitled to preferential treatment. That application was granted by the learned District Judge. From the order made by the court below the present appeal is brought to this court by one of the shareholders.

(2.) It is contended on behalf of the respondent that the bonus that was sanctioned under the resolution passed by the directors would come under the category of wages payable to workmen. The court below had accepted this contention. The reason given is that the word wages as defined in the Travancore Payment of Wages Act 1116 would include bonus or other additional remuneration payable for regular attendance, good work or conduct of the person employed and consequently it would not be unreasonable to construe the word wages occurring in the Travancore Companies Act corresponding to the Indian Companies Act as including bonus. This reasoning is entirely fallacious. This would be evident if reference is made to the opening words of the relevant section of the Travancore Payment of Wages Act which make it clear that the words defined in that section are to be understood in the sense of the definition, for the purpose of that Act. When it is a definition restricted in its scope to the particular Act, it cannot be regarded as a general definition that would apply to the term which occurs in other acts of the legislature. Therefore, it is not possible for us to uphold the view taken by the court below that the word bonus will come under the category of wages in the Companies Act. It appears from the records that on the date this resolution was passed there were creditors who were claiming payment of more than six lakhs of rupees by the company, according to the documents filed in the court below. The exact amount payable to the creditors has not yet been ascertained. To sanction a bonus exceeding Rs. 10,000 would certainly result in detriment to the creditors of the company. The resolution was passed at a time when the matter was pending on the appellate side of the erstwhile Travancore High Court and ultimately the company was directed to be wound up by that court. To recognise the employees of the company in respect of bonus as preferential creditors within the meaning of S.230 of the Indian Companies Act corresponding to S.285 of the Travancore Companies Act is certainly not warranted. The learned counsel for the liquidators wanted to rely upon S.25 of the Indian Contract Act sub-s.(2) by contending that the promise to pay bonus will come under the category of compensation agreed to be paid for service rendered in the past. This clause of S.25 cannot be applied to the present case because it contemplates cases in which services have been voluntarily rendered. Here the workmen have rendered services in return for the wages payable to them and if they have only discharged their duties as required by the agreement entered into by them with the employers no extra compensation promised to them will come within the meaning of S.25 sub-s.2, of the Indian Contract Act. This is clear from the decided cases which are all collected together in the commentary of Pollock and Mulla on the Indian Contract Act pp. 182 and 183, 7th Edition.

(3.) In these circumstances we have no hesitation in allowing this appeal and setting aside the order made by the court below.