LexPUNJAB STATE INDUSTRIAL DEV. CORPN. LTD. versus P.N.F.C. KARAMCHARI SANGH AND ANR.
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PUNJAB STATE INDUSTRIAL DEV. CORPN. LTD.
V.
P.N.F.C. KARAMCHARI SANGH AND ANR.
APRIL 4, 2006
[ARUN KUMAR AND R.V. RAVEENDRAN, JJ.]
Companies Act, 1956-Section 446-Companies (Court) Rules, 1959-
Rule 9-Company Court-Powers of. qua a company-in-liquidation-Held:
A
B
Company Court not empowered to fasten liability of the company-in-liquidation
towards its workers on Appellant, a distinct and separate corporation and C
a third party-Sick Industrial Companies (Special Provisions) Act, 1985.
Government Order-Note made by State Chief Minister-Held: Is not
an order of the State Government-Hence, not binding-Order of State
Government is issued in a prescribed manner and the note cannot be treated
as one.
D
PNFC, a company promoted by Appellant-State Industrial Corporation
was wound up under the Sick Industrial Companies (Special Provisions) Act,
1985 on recommendation of the Board for Industrial and Financial
Reconstruction (BIFR). In view of its financial difficulties, PNFC had not E
paid wages to its workers for several months. The workers approached the
Chief Minister of the State who made a note for Appellant to raise resources
in order to meet the liability of PNFC towards the worker's wages.
Relying upon the said note, the workers' association i.e. Respondent
No.I filed application before the Company Judge in High Court. The Company F
Judge directed Appellant to release funds in terms of the said note of the
Chief Minister to the Officfal Liquidator for paying dues of the workers. The
order was confirmed by the Division Bench of High Court.
In appeal to this Court, the question which arose for consideration is
whether the liability with respect to money due from PNFC towards its workers G
could be fastened on Appellant, a distinct and separate legal entity.
Allowing the appeal, the Court
751
H
752
SUPREME COURT REPORl S
(2006] 3 S. C.R.
A
HELD: 1.1. The Appellant could not be made liable for the dues owed by
the PNFC to its workers. (756-HI
1.2. Under Section 446 of the Companies Act, 1956 the powers of the
Company Judge qua a Company under liquidation may be wide, but that does
not empower the Company Judge to pass an order making a distinct and
B separate corporation, a third party, liable for the liabilities of the Company in
liquidation. This aspect unfortunately has not been adverted to either by the
Company Judge or by the Division Bench of the High Court. [755-GI
Sudarsan Chits (IJ ltd. v. U Sukumaran Pillai and Ors .. 119841 4 SCC
C 657 and Calcutta Chromotype ltd. v. Collector of Central Excise, Calcutta
AIR (l 988) SC 1631, distinguished.
2.1. The note of the Chief Minister cannot be said to be an order of the
State Government and therefore is not binding on the Appellant. The orders
of the State Government are issued in a prescribed manner and the note
D cannot be treated as one. [756-BI
2.2. Reliance on Article 135 of the Memorandum and Articles of
Association of the Appellant under which the State Government can issue
directives to the Appellant is misplaced in the present case because the note
of the Chief Minister cannot be said to be a directive of the State Government
E nor it is in relation to broad policy of the Company. [756-C-El
3. Though as a matter of law the Appellant could not be made liable for
the dues owed by PNFC to its workers, it is noticed that the then Chief
Minister had taken a sympathetic view in the matter while appending his
note. In view of the fact that the case relates to the dues of the workers, the
F State Government may sympathetically consider whether it can provide some
relief to the workers. [757-BI
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1392/2003.
From the Judgment and Order dated 4.7.2002 of the High Court of
G Punjab and Haryana in C.A.No. 14/2002.
Ravindra Shrivastava. N.S. Boparai. Rishi Malhotra and Prem Malhotra
for the Appellant.
R.K. Rathore Addi. Adv. Gen of Punjab, Amit Singh. Sanjeev Anand.
H Yakesh Anand, Vikas Vashishth, K.S. Rana, M.K. Venna and Arun K. Sinha
PUNJAB STATE INDUSTRIAL DEV CORPN. LTD.•·. P NYC. KARAMCHARI SANGH {ARUN KUMAR,J) 7 53
for the Respondents.
A
The Judgment of the Court was delivered by
ARUN KUMAR, J. Mis. Punjab National Fertiliser and Chemical Limited
(hereinafter referred to as 'PNFC') is a Company limited by shares and is
registered as a company under the Companies Act, 1956. This company was B
promoted by the Punjab State Industrial Development CorExcerpt shown. Read the full judgment & AI analysis in Lexace.