National Textile Workers' Union vs Ramakrishnan and Others

V. Ramaswamy, J.—This appeal is filed by the applicant in company application No. 883 of 1981 which was one of the three applications

filed by three different unions to implead themselves as parties in Company Petition No. 30 of 1981. The company Petition has been filed for

winding up a private limited company under S. 433(e) and (f) of the Companies Act. The learned Judge dismissed the applications holding that the

applicants have no locus standi to oppose the winding up as such and that, therefore, they cannot be impleaded as parties in the petition. In this

appeal, the learned counsel for the appellant strenuously contended that the unions represent a large body of workers of the company, that there is

a grave threat to their livelihood being affected in case the winding up is ordered and that in order to protect their interests they should be

impleaded as parties. In support of this contention, the learned counsel relied on a decision of the Bombay High Court in Bhalchandra Dharmajee

Makaji and others v. Alcock Ashdown and Co. Ltd., and others, (42 Company Cases 190) while disposing of an application for appointment of

Official Liquidator or as Provisional Liquidator, pending the hearing and final disposal of the main petition for winding up the Court made the

following observations :

After the amendment of Ss. 397 and 398 of the companies Act by Ss. 10 and 11 of the Companies (Amendment) Act (LIII of 1963) it would

appear that the affairs of the company have to be conducted not only in the best interest to its members for their profit but also in a manner which is

not prejudicial to public interest. The element of public interest enters into the management of the companies after 1963. The modern corporation

has become the accepted instrument of social policy, because if affects a large part of the economic life of the community. It has become an

instrument for the improvement of the economic standards of the people and for economic growth of the nation Society depends for some of its

needs on corporate enterprise. It has, therefore, an interest in its stability and efficiency as an economic institution. The element of public interest

also arises from the responsibility for ensuring a minimum wage to the numerous employees in the corporate sector. It is necessary to see that

people who put their labour and lives into a concern get fair wages, continuity of employment and a recognition of their right to their jobs, where

they have trained themselves to highly skilled and specialised work. In deciding whether the Court should wind up a company or change its

management, the Court must take into consideration not only the interest of the shareholders and creditors but also public interest in the shape of

the need of the community and the interest of the employees. This, in my opinion, is requirement of Ss. 397 and 398 of the Company Act.

These observations were made while considering the question whether when a company is unable to pay its debts the creditors are ex-debito

justitiae entitled to a winding up or whether the Court can take other circumstances into consideration. It is in these circumstances, the learned

Judge held that not only the interest in the shape of need of the community and interest of the employees also should be taken into account in order

into a winding up or otherwise. Thus the observations were not made for any other purposes as enabling or creating an interest in the unions for the

purpose of maintaining these applications for impleading them in the winding up petition.

The learned counsel for the appellant in this connection also cited a decision of the Supreme Court reported in Fertilizer Corporation Kamgar

Union (Regd.), Sindri and Others Vs. Union of India (UOI) and Others, , wherein the Supreme Court has made the following observations.

Lest there should be misapprehension, we wish to keep the distinction clear between the fundamental right to enforce fundamental rights and the

interest sufficient to claim relief under Art. 226 and even under other jurisdictions. The learned Attorney general almost agreed, under pressure of

compelling trends in the contemporary law of procedure, that Art 226 may probably enable the petitioner to seek relief in the facts suggested by

the Court hypothetically existed. Shri A. K. Sen also took up a similar position. I will put aside Art. 3 for a moment and scan the right under Art.

There is nothing in the provision (unlike Art. 32) to define person aggrieved'', ''standing'' or ''interest'' that gives access to the Court to seek

redress.

If a citizen is no more than a way farer or officious intervener without any interest or concern beyond what belongs to anyone of the 660 million

people of this country, the door of the Court will not be ajar for him. But if he belongs to an organisation which has some concern deeper than that

of a busybody, he cannot be told off at the gates, although whether the issue raised by him is justiciable may still remain to be considered. I,

therefore, take the view that the present petition would clearly have been permissible under Art. 22"".

These observations are made with reference to the locus standi to file writ petitions under Art. 220 of the Constitution of India. It has nothing to do

with applications filed under the Companies Act. Entirely different considerations arise when the constitutional provisions are involved. This

decision also is of no avail to the learned counsel for the appellant.

On the other hand, we have a direct judgment reported in In re Edward Textiles Ltd. (38 Company Cases 284). Wherein a learned single Judge

of the Bombay High Court, while considering an application for impleading a union in winding up petition, held that the union has no locus standi to

oppose the winding up petition though the workers of the company as individual creditors may oppose.

The learned Judge, while dismissing the applications, has followed the decision in In Re Edward Textiles Ltd. (38 Company Cases 284). We

agree with this view of the learned Judge. While disposing of a winding up petition, the Court should also consider whether it ''just and equitable"" to

wind up the company. That 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. Normally, we have to test the case with reference to the right of a person to file a winding up petition itself,

though that may not be the only ground on which a person can be impleaded or not impleaded. But that in our opinion will be a very relevant

consideration. There can no doubt that a winding up petition can not be filed by any union as such under S. 439 or any provision. 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. For the foregoing reasons, this appeal dismissed.

The learned counsel for the appellant sought leave to appeal to the Supreme Court against our judgment, invoking his right of oral request under

Art 134-A. We are not satisfied that the proposed appeal to the Supreme Court either involves and question as to the interpretation of the

Constitution or any question of general law which needs to be decided by the Supreme Court. Hence, leave is refused.