LexNATIONAL TEXTILE WORKERS' UNION ETC. versus P.R. RAMKRISHNAN AND OTHERS
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NATIONAL TEXTILE WORKERS' UNION ETC.
v.
P.R. RAMKRISHNAN AND OTHERS.
December IO, 1982
[P.N. BHAGWATI, 0 CHJNNAPPA REDDY, E.S. VBNKATARAMIAH,
BAHARUL {SLAM AND AMARENDRA NATH SEN, JJ.]
Indian Companies Act, 1956-S. 433-Petitlon for winding-up of company-
Orders likely. to adversely affect interests. of workers-Workers have right to
appear and be heard-Workers also entitled ta hearing on their own request when
application for appointment of provisional liquidator is being considered-Trade
Unions representing workers competent to intervene on behalf of workers.
Companies (Court) Rules, 1959-R. 34=-Provides for procedure only-Does
not confer on workers right to appear at hearing of Winding-up petition.
The respondents were two grotJps of sharebOtder.s of a private: limited
company which had a thousand personi under its employn1ent.
A group of
shareholders filed a petition for winding-up the company under els. (e) and (f) ·of
s. 433 of the Indian Companies Act, 1956 along with applications for an interim
·injunction and for appointment of a provisional liquidator. The Company Judge
passed an order of injunction restraining the company from borrowing any
moneys from banks, financial institutions or others without the prior permission
of the cOurt. Tt::iree trade. unions representing the employees Of the company
filed applications for being im;:ileaded as respondents/interveners in the winding-
up petition clain1ing that the interests of the employees had bee'n adversely
affc\:ted by the interim order. The Company Judge rejected these applications. A
Division B~nch of the f-Iigh Court turned down the appeal preferred by one of_tbe
unions and that union sought special leave to appeal against _the order ·or the
Division Bench-while the other two unions sought special leave to appeal againsc
the order of the Company Judge.. The Court granted special leave to all the three
unions and perrniued the Con1pany Judge to pass orders on the application
pending before him for appointment of a provisional liquidator with the direction
that the liquidator shall not tike any st.:ps wh\ch would prejudicially affect the
emplojtees.
It was contended on behalf of the appellants that si Dee an order winding
up a company amounts to notice or termination of services of its employees under
s. 445(3) and since even an interim Order freezing the resources of the company
might affect the interest of the employees by making it difficult for the company
to pay their ~ages, etc.. it would be contra~y to f~ir judicial pr_ocedure and
violative of the rule audi alteram partem to deny the employees the right to be
'1eard before any order prejudicially affecting their interests is made. The
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NATIONAL TEXTILES v. P.R. RAMAKRiSHNAN
923
employees who contribute materially to the working: of a company and enable it
to effectively play its socio-econarnic role are equal, if not more important,
partners in the running of the company and they must be heard io a proceeding
for 'windihg tip of the company. It was further urged ihat under L 34 of the
Comi>anies (Court) Rules, 1959 tbe employees have a right to appear at the
hearirig of a wioding·up petition either to· suppOrt or to ~ppose it.
On behalf of the respondents it was contended that the employees of a
company have no locus standi in a wiading-up petition as the Act does not
contain any provision conferring such a right on them ; that since the Act is a
Se1f·contained Code exhaustive in regard to all matters relating to a company, no
such right could be spelt out in their favour outside the provisions of the Act t
that r. 34 of the Companies (Court) Rules, 1959 does not confer such a right on
thein and that, under the various provisions of the Act·includiog ss. 439 and 440J
it is only .the creditors and contributorie's and in certain specified contingencies,
the Registrar and the Central Government, who are entitled to participate in ihe
proceedings for winding up of a coinpany. It was further coritendcd that in this
case it was not even the .eiilployees, but the three trada unioas, who had applied
for being heard, and since the trade union·s had no right to be heard, Jheir.
applications hild been rightly rejeCtCd.
Allowing the appeals,
HELD: By.Majority: Per Bhagwati, Chinnappa Reddy and Baharul Islam,
JI. (Yen.,:ataramiah and Amarendra Nath Sen, JI. dissenting):
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