RAM HARI DE Vs. OFFICIAL LIQUIDATOR HIGH COURT

JUDGEMENT

(1.) This is an appeal against an order of B. C. Mitra, J., dated 9th July, 1963. The learned Judge was dealing with a number of appeals under Rule 164 of the Companies (Court) Rules, 1959, against the decision of the Official Liquidator rejecting the claims of the appellants to various sums of moneys to which they claim to be entitled by reason of termination of their services under the Bank of China (in liquidation). The facts are shortly as follows: The Bank of China carried on business in India. Sometime in May, 1962 the Reserve Bank of India revoked the license given to it for doing foreign exchange business in India, thereby making it impossible for it to act as an exchange bank. On the 14th June, 1962 the Bank of China issued a notice under paragraph 522(6) of the All India Industrial Tribunal (Bank Disputes) Award, intimating its intention to effect retrenchment of staff with regard to certain employees on the ground that consequent upon revocation by the Reserve Bank of India of its license to do foreign exchange business in India, the volume of its business as an exchange bank has been (sic) cally reduced. The Bank of China's employed Union, representing the workmen, raised an industrial dispute over the said retrenchment. Conciliation proceedings were held and ultimately certain terms of settlement were arrived at. The terms are set out in the order of the learned Judge and briefly speaking, provide for the grant of retrenchment compensation, gratuity, allowances and other payments. It may be stated that these payments are on a very generous scale. Thereafter, the political atmosphere between China and India became more complicated and the bank sewed further notice of retrenchment upon a fresh batch of employees. On the 3rd September, 1962 the President of the Employees' Union wrote to the bank that it was presumed that the retrenchment benefits to be given to the further batch of employees proposed to be retrenched, would be the same as provided in the aforesaid tripartite agreement. In answer to the said letter, the Acting Manager of the Bank wrote a letter dated 5th September, 1962 confirming that the retrenchment benefits as provided in the tripartite agreement dated 4th August, 1962 will be given by the Bank to its employees in all stages of retrenchment. On the 2nd November, 1962 the licence of the bank to do business in India was cancelled. On the 10th December, 1962 a winding-up order was made for liquidation of the said bank. The appellants, who were employees of the said bank now in liquidation, claimed before the Official Liquidator that the bank was indebted to them in respect of full allowance, leave pay, notice pay, gratuity and compensation for discharge and/or retrenchment and special gratuity, in terms of the tripartite agreement mentioned above. The Liquidator allowed one item of the claim, namely, the annual allowance for 1962. He rejected the claims for payment of retrenchment compensation, salary in lieu of notice for retrenchment, special gratuity etc. The court below has held that the appellants were not entitled to the benefits under the terms of the tripartite agreement, but they were entitled to benefits under Section 25FFF of the Industrial Disputes Act, 1947, but subject to the conditions contained in that Act and the Companies Act of 1956. Before us, Mr. Sen on behalf of the appellants has challenged the order on two grounds: The first ground is that the learned Judge was in error in holding that the appellants were not entitled to benefits under the terms of the tripartite agreement and secondly, that the particular form of the order made by the learned Judge in respect of the claim under Section 25FFF of the Industrial Disputes Act, 1947, is erroneous.

(2.) On the first point, the argument advanced is as follows; It is stated that the said agreement dated 4th August, 1962 was arrived at between the bank and the union in respect of retrenchment of 15 clerical and 15 subordinate staff. The bank was, however, slowly closing down and the correspondence, particularly the letters dated 3rd September 1962 and 5th September, 1962 mentioned above, clearly shows that the bank agreed to extend the. benefits of that agreement to all workmen who would be (sic) in future. It is, therefore, stated that (sic) agreement came into existence for the benefit of all the workmen of the bank and that the appellants are entitled to take benefit thereof. The short answer given by the learned Judge to this contention is that the tripartite agreement only dealt with the question of retrenchment, "Retrenchment", and the compensation to be paid in the nature of retrenchment compensation, can only arise when a business continues but a number of workmen were retrenched. It cannot arise in the case of a total closure of the business or when the employment comes to an end by operation of law. Section 445(3) of the Companies Act 1956 deals with the effect of the making of a winding-up order and runs as follows:

(3.) The position is that an order for a compulsory winding-up has the same effect as notice of discharge given on the date when the winding up order is made. It is nobody's case that the business of the company has been continued after the date of the winding-up order. The point, therefore, is in a very small compass. The tripartite agreement expressly stated that the amount payable thereon was in the nature of "retrenchment compensation". The question is whether the discharge of employees under Section 445(3) of the Companies Act, upon the compulsory liquidation of a company, operates as an order of retrenchment. If it does, then the appellants would be entitled to amounts agreed upon between the parties under the so-called tripartite agreement. If not, they are not entitled to the same, although they may be entitled to payment under Section 25FFF of the Industrial Disputes Act, 1947. It was argued in the court below that all the employees were entitled to take advantage of the tripartite agreement, firstly, on the ground that it became part of their contract of service and secondly, on the ground that the discharge of employees under Section 445(3) of the Companies Act is equivalent to retrenchment as contemplated by the tripartite agreement. The learned Judge was right in rejecting both the contentions. So far as the first ground is concerned, the so-called tripartite agreement expressly used the word "retrenchment". There is nothing to show that at the date when it was agreed upon, the bank had closed its business. It closed its business only when it was compulsorily wound up by the court. The memorandum dated 4th August, 1962 embodying the terms of settlement itself states that it is a settlement of an "industrial dispute". There can be no doubt that the expression "retrenchment" was used in the sense that it is used under the Industrial Disputes Act. Therefore, even if the terms became a part of the contract of service of the appellants it does not advance matters any further, because the benefits thereunder would only be available in the case of retrenchment and not otherwise. Therefore, the short point is as to whether the termination of services of the workmen under Section 445(3) of the Companies Aot, gives rise to a "retrenchment as contemplated by the Industrial Disputes Act. Section 25J of tine Industrial Disputes Act provides that the provisions contained in Chapter VA which deals with "lay-off and retrenchment", shall have effect notwithstanding anything inconsistent therewith contained in any other law. We must therefore, find out what is the meaning of "retrenchment" under the Industrial Disputes Act. Section 2(oo) defines retrenchment as follows: