In Sanjay Sadanand Varrier v M/s Power Horse India Pvt Ltd, a larger bench of Bombay High Court recently held that an employee can maintain a petition for winding up of a company as a creditor based on a claim of the recovery of unpaid employment dues.
The case was referred to a larger bench as the single judge disagreed with the decision of the single judge in the case of Mumbai Labour Union v M/s Indo French Time Industries Ltd (2001).
Varrier filed a company petition before the high court contending that as the company had failed to pay him employment dues from 2009 until his resignation in March 2012, the company was unable to pay its debts.
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The company opposed the petition on the ground that Varrier was not a creditor, and relied on the Mumbai Labour Union judgment. Varrier contended that even if an employee has no locus to file a company petition in respect of unpaid wages, salary and emoluments, the employee can to file such a petition as a creditor of the company.
The larger bench observed that the Mumbai Labour Union decision had been overruled by a division bench of the court in 2005. After analysing sections 434 and 439 of the Companies Act, 1956, as well as provisions of the Trade Unions Act, 1926, the larger bench held that a winding-up petition by a trade union would be maintainable and workers who have not been paid their wages or salary would be creditors under section 439(1)(b) of the Companies Act, 1956. Section 15 of the Trade Unions Act clearly mandates that a trade union can take up this cause for and on behalf of its members. Hence, after complying with the provisions of section 434 of the Companies Act, 1956, a trade union could present a winding-up petition.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or bhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
