KRISHI ENGINES LTD Vs. KRISHI FOUNDRY EMPLOYEES UNION

JUDGEMENT

(1.) M/s. Krishi Engines Limited (hereinafter called, holding company) was ordered to be wound up by this Court by judgment dt.16.10.2000 passed in C.P.No.64 of 1997. The Official Liquidator attached to this Court was appointed as Provisional Liquidator under Section 452 of Companies Act,1956 (for short, the Act). The liquidation process of the holding company is at final stages. M/s. Krishi Foundry Employees Union (hereinafter called, the Union) filed a claim petition with Official Liquidator along with workers of the holding company. The Official Liquidator after adjudication of their claim passed an order dt.15.4.1997 to the effect that the claim of the Union cannot be included in the claim of the workmen of holding company in liquidation against estate of the holding company. When the Official Liquidator adjudicated claim of the union the subsidiary company was not in liquidation. Be it also noted that the order of the Official Liquidator dt.15.4.1997 became final and it was not challenged before any authority much less this Court. THE PRESENT COMPANY APPLICATIONS

(2.) M/s.Krishi Foundry Limited (hereinafter referred to as subsidiary) which was initially incorporated as Private Limited Company under the Act on 4.2.1961 later converted as Public Limited Company (hereinafter called, subsidiary company) in 1976 and became a subsidiary of the holding company in the same year. The subsidiary company had 69 employees on its rolls. It was catering to the requirements of its holding company by manufacturing mouldings and engine components. The subsidiary became sick and its management was taken over by A.P. Industrial Development Corporation (APIDC) by virtue of orders issued by the Government of Andhra Pradesh being G.O.Ms.No.150, dt.18.2.1976 and G.O.Ms.No.151 dt.4.4.1988. But, APIDC stopped operations of the subsidiary company along with operations of holding company without any lay off or lock out. The employees were discharged from their duties. APIDC did not pay wages of the workers since 1986. As per orders of this Court in W.A.Nos.1159, 1183 and 1371 of 1987 wages were paid for three months from October, 1986 to December 1986. In those circumstances, the applicant union issued a statutory notice dt.5.4.1997 calling upon the subsidiary company to pay dues within three weeks from the date of receipt of notice and having received no response, the Union filed Company Petition No.64 of 1997 under Sections 433(e) and (f), and 439 of the Act for winding up the subsidiary company. This Court ordered advertisement of the petition, but none appeared. As many as sixty two employees filed affidavits before the Company Court. This Court by order dt.16.10.2000 ordered winding up of Krishi Foundry Limited.

(3.) The petitioner Union claims that for all practical purposes, the business of the subsidiary company was treated as part of the holding company. Both the companies are one economic entity and the business transactions, property, bank, employees and management of both the companies are treated as one unit. They are different operating spheres of single business unit and entire financing was by the holding company. The workers and employees of subsidiary company and holding company were considered inter-transferable and they were transferred to subsidiary company to holding company and vice versa on regular basis. They contend that all the assets of the subsidiary company can be called upon to satisfy the liabilities of the holding company which is in liquidation and conversely, the assets of the holding company can be held responsible for the debts and liabilities of the subsidiary company. It is their further case that the subsidiary company has no assets of its own except two factory sheds allotted by the A.P. Industrial Infrastructure Corporation Limited (APIIC) on hire purchase in 1977. The total claim of all the members of the Union is to the tune of 1,94,06,312/-. They have already submitted a claim petition before the Official Liquidator in Company Petition No.64 of 1997. The Official Liquidator has not decided the claim of the workers and it is likely to take some time. As the subsidiary company has no other assets other than the industrial sheds/plots obtained from APIDC on hire purchase, claims of the workers of the company shall have to be satisfied out of the assets of the holding company. On 17.9.2001 sale of open land belonging to holding company in favour of A.P. Housing Board was confirmed and an amount of Rs.19.70 crores was realised. The total liabilities of the holding company are about Rs.14.97 crores and therefore even after meeting all the liabilities there would be surplus amount of Rs.4.73 crores. The workers of the subsidiary company are also entitled to be considered for satisfaction of their claims from out of the assets of the holding company in as much as liability of the subsidiary company has to be considered as liability of the holding company. With the above factual background, the union filed these two applications.