This petition for winding-up is by the company itself on the grounds set out in Ss. 433(a), 433(e) and 433(f) of the Companies Act, i.e, on the footing that a special resolution to that effect has been passed and also on the ground that the company is not able to carry on any business or any of its objects and that it was unable to pay its debts and that on the facts and circumstances it is just and equitable that the company be wound up by this Court.

2. This petition has been opposed by the Maharashtra General Kamgar Union (hereinafter referred to as the union) by one Pandurang Hari Mhatre who represents 1700 workers, some of whom admittedly are members of the Maharashtra General Kamgar Union.

3. It is necessary to set out the history relating to the incorporation of this company and the facts leading up to this petition.

4. The Government of Maharashtra with the avowed object of relieving the congestion in the City of Bombay and developing its suburbs and outskirts, established a company by the name of City and Industrial Development Corporation of Maharashtra, Ltd., (hereinafter referred to as C.I.D.C.O). Sri Ganguli, relying upon certain observations made by a Division Bench of our High Court in the case of Hasuram G. Gharat v. General Manager, Bombay Metropolitan Transport Corporation, Ltd., [1987 — I L.L.N 233], submits that C.I.D.C.O is established under the provisions of S. 113 of the Maharashtra Regional and Town Planning Act, 1966 (hereinafter referred to as Town Planning Act).

Sri Dwarkadas and Miss Sikander, neither of whom appears for C.I.D.C.O and who, as pointed out hereinafter claim to be independent of C.I.D.C.O, vehemently dispute this statement and Sri Dwarkadas on taking instructions from his clients informs the Court that C.I.D.C.O has filed a special leave petition against this judgment and a stay had been obtained and, therefore, these observations could not be relied upon. The fact is that C.I.D.C.O's entire shareholding belongs only to the Government of Maharashtra. The Government of Maharashtra, for and on behalf of C.I.D.C.O, had acquired vast areas of land from agriculturist rendering them unemployed. At that time they had launched a rehabilitation programme for these affected persons and had, in literatures distributed by them, held out as follows:

“How C.I.D.C.O plans to rehabilitate project-affected persons: True rehabilitation is as complex as it is a delicate matter, involving not just deft social moves, but careful economic measures. And this is exactly how C.I.D.C.O has considered the situation of displaced project-affected persons… The solution to displacement lies in providing better means of livelihood and paving the way for assimilation of project affected persons into the new urban matrix, with improved standard of living.”

In pursuance of these representations, a large number of these affected persons and/or their children were employed by C.I.D.C.O in its services. One of the services which C.I.D.C.O was providing was a transport services. This transport service was being rendered by C.I.D.C.O, as part of its development programme for New Bombay. On 15 November 1979, C.I.D.C.O incorporated a separate company known as C.I.D.C.O Transport. Corporation, Ltd., and on or about 1 April 1980, the name of the said C.I.D.C.O Transport Corporation, Ltd., was changed to the present name, namely, Bombay Metropolitan Transport Corporation, Ltd. At the time when the C.I.D.C.O Transport Corporation Ltd., was incorporated, C.I.D.C.O transferred all its assets pertaining to the transport service including buses to the said C.I.D.C.O Transport Corporation, Ltd., and also transferred all its employees in its transport service to the newly established company along with the benefits of continuity in service which these employees would otherwise have enjoyed and many of the workmen who are today opposing this petition, are persons and/or family members of those persons whose lands had originally been acquired by the Government of Maharashtra for C.I.D.C.O and who had been taken in employment of C.I.D.C.O pursuant to the representations made and whose services were transferred from C.I.D.C.O to the petitioner-company. All these facts have been averred in the affidavit and there has been no denial of these facts.

5. The petitioner-company after its incorporation ran the transport services as per its objects. Admittedly it operated 23 routes in New Bombay. The financial position of the earlier years is not available, but as set put in the petition, the business of the petitioner-company ran continuously at loss at least from the years 1980–81 and onwards. The figures are as follows:

Years Net losses: 1980–81 Rs. 57,22,858 1981–82 Rs. 82,31,719 1982–83 Rs. 1,21,88,339 1983–84 Rs. 1,67,43,693

The reasons for losses as given by the Board of Directors in its report to the shareholders for the year ended 31 March 1982, inter alia, were:

(a) To give impetus to the Vashi Township and to encourage traders to come and occupy Agriculture Produce Market, highly subsidised routes had been introduced between Mankhurd and Vashi, Mankhurd and Agriculture Produce Market.

(b) The petitioners were compelled to introduce new routes between Dadar and Konkan Bhavan, Bandra and Konkan Bhavan at the instance of the Government to facilitate Government servants to attend office at Konkan Bhavan.

(c) The petitioners had issued concessional passes to the students as a social welfare measure.

Thereafter, for the year ending 31 March 1983, the Directors in its report to the shareholders over and above the grounds given above gave three further grounds, namely:

(i) The fact that the petitioners are still in its infancy having commenced the business only from 1 April 1980.

(ii) The go-slow of the employees.

(iii) No hike in the fares charged to the passengers.

Thus even as per the Directors' report, the company was running at a loss, because it was providing a public utility service and trying to give impetus to the people to move to the new township and/or was being compelled by the Government to introduce new and uneconomical routes merely to facilitate Government servants to attend Government offices at Konkan Bhavan and also because it was issuing concessional passes and could not increase the fares charged to the passengers. In fact the Government of Maharashtra by its Notification No. IDA 1483/2823-Lab-2, dated 19 November 1983, has declared the petitioners' establishment as a “public utility service.”

6. This was the state of affairs till February 1984. It is at this stage that the real reasons leading up to this petition arise. It would seem that the petitioner-company had been having some labour problems from the year 1982 onwards. However, those problems were not of such a nature as prevented the petitioner from running or carrying on its business up to February 1984. In February 1984, the workers commenced an indefinite strike in order to press the demands which had been raised earlier.

7. The then Chief Minister decided in a meeting held on 24 February 1984, that the petitioner-corporation should close down. A notice declaring a lockout was issued on 3 March 1984 and on 27 March 1984 the petitioners applied under S. 25-O of the Industrial Disputes Act seeking permission of the State Government to close down the undertaking. The grounds on which the said application was made were:

(1) Continued illegal strikes.

(2) Their effect on the general public and the adverse opinion of the public.

(3) Threats given out to the officers.

(4) Disregard of the orders of the Court.

(5) Inter-union rivalry.

(6) The uneconomic working in the undertaking.

By an order, dated 24 May 1984, the Hon'ble Minister who heard the matter on behalf of the State Government granted permission to the petitioners to close down. Against this order, the union and workmen filed appeals. By its judgment and order, dated 21 November 1984, the Appellate Industrial Tribunal, after trial and evidence allowed the said appeals and set aside the order, dated 20 May 1984, and rejected the application under S. 25-O. It may be mentioned that before the Appellate Industrial Tribunal, the employees had given undertakings that they would observe discipline and maintain harmonious relationship with the management. Against this rejection, the petitioners filed a writ petition in this Court being Writ Petition No. 5070 of 1984. The said writ petition was dismissed by a Division Bench of this Court on 11 January 1985. Even before the High Court all the unions in the field gave undertakings to the Court not to indulge in violence and not to resort to illegal strikes and to observe discipline and maintain harmonious relationship with the management. Whilst dismissing the writ petition, the learned Judges inter alia came to the conclusion that he petitioners were an undertaking which could safely be termed as an agent of the State engaged in a public transport service ultimately held as follows:

“So far as the economic condition of the undertaking is concerned, the learned appellate authority has rightly not accepted the case of the petitioners even on merits. In our view, in a welfare State in the case of an agency of State qua a public undertaking which is engaged in a public utility service, a very strong case will have to be made out before a permission for closure is asked for or granted. In the present case the C.I.D.C.O has started the undertaking as a part and parcel of its rehabilitation scheme. We are informed that no other transport facility is available so far as the villages catered by the petitioner undertaking are concerned. If this is so then obviously the closure of such an undertaking is bound to result in hardship to the general public. Therefore, taking any view of the matter, in our view the appellate authority was wholly justified in allowing the appeal and rejecting the application for permission to close down the petitioners' undertaking…”

8. The petitioners, thereafter, on 30 January 1985, again applied to the State Government under the provisions of S. 25-O of the Industrial Disputes Act, for closure of its undertaking being its factory at Thurbe, inter alia, on the following grounds:

“Such prolonged spell of inactivity spanning a period of about twelve months has crippled irreparably the financial capacity of the applicant-corporation. A copy of its balance sheet for the period ended 31 March 1984, duly audited by the chartered accountants is annexed as exhibit to disclose the liabilities of the applicant-corporation exceeding its assets in a forbidding sum of Rs. 4,37,41,951 with result that its share capital stands wiped out wholly and its borrowing power has ebbed out irretrievably. The applicant-corporation has no asset except the fleet of omnibuses and its liquidity stands as its lowest point being Rs. 2000 in the current account with the bank. The applicant-corporation is bogged down in a financial crisis with no hope of salvage and is inevitably left with no option but to close down its said undertaking. The financial adversity of the corporation is of such magnitude as would ordinarily warrant its winding-up or liquidation by the Court but for the concern of the corporation to avoid further damage to deterioration of its solitary asset being the fleet of omnibuses and to dispose of such asset, to realise an adequate sum necessary to pay whatever is due to its workmen by way of gratuity, retrenchment compensation and outstanding wages, if any. It is this consideration which has filed the preference of the applicant-corporation towards closure as prayed rather than liquidation as done ordinarily.”

9. After hearing the petitioners and the workers, the then Hon'ble Minister for Co-operation, Labour and Legislative Affairs, State of Maharashtra, by his order, dated 29 March 1985, rejected the application and, inter alia, held as under:

“The reason given by the corporation for the closure of the factory/workshop is a financial incapacity of the corporation. From the observations of the appellate authority and the High Court mentioned above, it will be clear that in respect of a concern like this it cannot be sufficient ground for closure and I uphold the same since in my opinion, the very reason existed earlier too.”

10. The petitioners by an application, dated 2 May 1985, applied for review, which application was pending on the date this petition was filed. However, Miss Sikander, appearing for the Government of Maharashtra, has made a statement that in view of the fact that under S. 25-O, the petitioners are entitled to apply afresh after one year from the date of the order, dated 29 March 1985, the Government has decided that no orders will be passed on the review application. Thus in effect the second application of the petitioners also stands rejected.

11. On 14 May 1985, at a meeting of the Board of Directors of the petitioner-company (at which meeting only three out of the seven Directors were present) a resolution calling an extraordinary general meeting was passed. It is pertinent to note that a copy of the resolution was sent to the State Government.

12. Notices calling the meeting were sent on 24 May 1985, and an extraordinary general meeting was held on 28 May 1985, (within four days) at which a resolution as required under S. 433(a) of the Companies Act was passed.

13. The petitioners thereafter in or about September 1985, transferred 50 buses belonging to the petitioners to the Maharashtra State Road Transport Corporation. The case of the petitioners is that as the said corporation was the only establishment holding permit to ply buses for general public in New Bombay area and as petitioners' buses were deteriorating and lying unattended, an offer was made to Maharashtra State Road Transport Corporation to purchase these buses and a certain arrangement was arrived at. Whilst the 50 buses have been handed over to Maharashtra State Road Transport Corporation no amounts have been received as such by the petitioners. According to the petitioners this offer was made as Maharashtra State Road Transport Corporation are the only body apart from petitioners, entitled to ply buses for general public in New Bombay area.

14. The union on 30 September 1985, filed an application under S. 28, M.R.T.U and P.U.L.P Act, 1971, and an ad interim order to lift the lockout was passed. This was vacated on 18 February 1986, on the statement from the petitioners that a resolution under S. 433 (a) of the Companies Act had been passed. On or about 26 December 1985, the union had also filed a complaint under S. 48 of M.R.T.U and P.U.L.P Act, 1971, for action against the petitioner-company and its Directors. A summons was issued by the Second Labour Court, Thane, on 19 February 1986. The petitioners on 28 April 1986, filed a writ petition in this Court being Writ Petition No. 471 of 1986, to have the said criminal proceedings quashed. The said writ petition is pending.

15. In the meantime on 14 March 1986, this petition was filed. In the petition, the petitioners have stated that as its business operations came to a standstill in or about February 1984, the company has no liquid funds whatsoever. The petitioners have thereafter set out the losses for the earlier years as indicated hereinabove and stated that on 31 March 1984, the accumulated loss was Rs. 4,37,41,951.

It has also been averred that:

“… the company has no capacity or ability to borrow monies from any financial institution, bank or otherwise and its financial credibility and borrowing capacity is crippled irretrievably.”

It is also averred thus:

“The company submits that upon the rejection of the said writ petition by this Hon'ble Court as aforesaid, its Board of Directors reviewed the entire position in detail for the purpose of reviewing, if possible, the undertaking of the company in deference to the orders of the Hon'ble Industrial Court and this Hon'ble Court but the Board of Directors found that it would among other things need a sum of at least rupees one crore immediately to restart its business operations which the Board considered as beyond the company's capacity and ability…”

The petitioners have craved leave to refer to and rely upon balance sheets and profit and loss accounts for the years ending 31 March 1984 and 31 March 1985 and finally averred that:

“…its liabilities far exceeded its assets.”

16. As many of the above averments were without any particulars and as the present condition of the buses or the exact amount required to put them in a running condition was not known the petitioners were asked to file an affidavit clarifying the position. Two affidavits, dated 9 and 19 February 1987 were thereafter filed by the petitioners.

17. Sri Dwarkadas has submitted that as

(a) the petitioner-company is a distinct legal personality and therefore, it was the financial position of the petitioner-company only that was to be taken into account;

(b) the petitioner-company's financial position as disclosed to this Court on affidavits is not disputed at a 11;

(c) the balance sheets clearly show that the entire substratum of the company has been wiped out;

(d) the company is absolutely and commercially insolvent and is not in a position to pay its debts or to carry on or run its business or to fulfil its objects;

(e) that notwithstanding the fact that the earlier applications under S. 25-O of the Industrial Disputes Act, inter alia, on the ground of financial difficulty, have been rejected this petition is not barred on the principles of resjudicata or principles analogous thereto;

(f) that the petitioner-company was running a public utility service is not a factor which must be taken into account by the Court whilst considering this petition;

(g) the Companies Act related to and dealt with incorporation, regulation and winding-up of companies, whereas the Industrial Disputes Act dealt with investigation and settlement of industrial disputes and the Companies Act was, therefore, a self-contained code not subject to the provisions of any other Act or law;

(h) that the provisions of part VII of the Companies Act applied even to a Government company as defined under the provisions of S. 617 of the Companies Act;

(i) once grounds as set out in S. 433(a) to (c) of the Companies Act are made out, the Court had no discretion and was bound to order winding-up and that the discretion not to wind up a company was only in cases falling under S. 433(f) of the Companies Act; and

(j) the fact that order would result in unemployment or affect interest of the public would be no ground for refusing relief to the petitioners and lastly that it was not open to this Court to go behind the corporate veil and/or to compel a holding company and/or the State to run an economically unviable unit.

18. Miss Sikander, initially stated that the Government of Maharashtra was submitting to the orders of the Court and was neither supporting nor opposing the petition. However, for reasons not difficult to guess. Miss Sikander has thereafter argued that even though the petitioners and/or C.I.D.C.O were Government companies under S. 617 of the Companies Act, they were separate legal entities and not subject to the control of the Government. Miss Sikander relied upon two authorities of the Supreme Court in this behalf, namely, the case of Praga Tools Corporation v. D.V Imanaul, [(1969) 1 SCC 585 : A.I.R 1969 S.C 1306] and the case H.E.M Union v. State of Bihar, [(1969) 1 SCC 765 : A.I.R 1970 S.C 82].

19. It must be mentioned at this stage that even though he had initially argued to the contrary, Sri Dwarkadas on being shown the observations of the Division Bench referred to hereinabove conceded that it was not open to the petitioners to argue that they were not the instrumentality or the agency of the State Government.

20. Sri Ganguli and Sri Khankar on the other hand have submitted that:

(a) the petition is filed with the mala fide intention of achieving by an indirect method what the petitioners could not achieve otherwise, i.e, a closure;

(b) that on principles analogous thereto it was not open to the petitioners to urge the ground of financial and commerical insolvency as this aspect has already been considered and decided upon by the Industrial Court and the Division Bench of our High Court;

(c) that the losses for all these years were due to causes extraneous to business considerations;

(d) that no metrial or facts had been placed before the Court to show why the business could not be restarted and/or that even in spite of best efforts it would not be possible to run the business except at a loss;

(e) that the substratum of the company had not vanished and it was denied that the company was unable to pay its debts;

(f) denied that the company had no capacity or ability to borrow moneys and/or that its financial credibility and borrowing capacity was crippled irretrievably; and

(g) that the petitioners were nothing else but an instrumentality of or agency of the State carrying on functions which would otherwise have to be carried on by the State and lastly that the corporate veil should be lifted and that the company should be identified with the Government of Maharashtra engaged in a commercial activity which was one of the functions of the State.

21. In my view, Sri Dwarkadas is right in submitting that the considerations which are to be taken into account for the purposes of considering a winding-up petition are different from considerations under S. 25-O of the Industrial Disputes Act and that, therefore, the petition would not be barred on the principles of res judicata and/or principles analogous thereto. However, to the extent that certain factual aspects have been agitated, considered and decided, the same cannot be permitted to be reagitated. Two factual aspects which have been finally decided are that the petitioners are an instrumentality or agency of the State and that, as such, the ground of financial inability or commercial insolvency is not available to them.

22. The petitioners in order to succeed, would have to show that the petition is not filed with mala fide or improper motives and/or that it is not a gross abuse of process of Court and that any of the requirements of S. 433 is satisfied. It is well settled that merely because there have been trading losses, that by itself does not mean that the substratum of the company is destroyed. The petitioners would have to show that there is no reasonable prospect of their ever making profit in the future and that they have no prospect of raising finances or carrying on business.

23. On these principles and, in the light of the rival contentions, the grounds given in the petition now need to be considered.

24. The first ground is that a resolution as required under S. 433(a) of the Companies Act, has been passed and, therefore, the company was entitled to a winding-up order. In any view, the facts as set out hereinabove make it abundantly clear that pursuant to the decision of the then Chief Minister, all attempts have been made merely to implement that decision and close down petitioner-company. Towards that end applications under S. 25-O of the Industrial Disputes Act were made, workers served with notices of termination, writ petitions filed and when all those attempts fail, the resolution is got passed by shareholders who are all nominees of C.I.D.C.O, and/or the Government of Maharashtra. There can be no doubt that by the resolution and by this petition, closure which has been refused twice, is now sought to be achieved. The whole intention, therefore, is mala fide and intended to terminate the services of the workmen by passing the provisions of Indus trial Disputes Act. It is all the more mala fide when one notes that it is in complete disregard to public interest and also in violation of the solemn assurances given at the time when vast areas of land were being acquired.

25. As regards the ground of commercial insolvency, as indicated earlier, closure on the ground of financial incapacity his been refused. However, Sri Dwarkadas is right in contending that in the applications under S. 25-O the financial capacity of the company was viewed in the light of it being a public utility service, whereas for the purpose of winding-up the financial position of the company itself has to be examined. I do not, however, agree with Sri Dwarkadas that the company-Court must ignore the fact that the petitioners are carrying on a public utility service. As set out hereinafter, public interest is a factor which must be taken into account by this Court.

26. Whilst examining the financial position of the petitioners one finds that the entire paid up capital of Rs. 10 lakhs is wholly owned by C.I.D.C.O, whose share capital is held wholly by the Government of Maharashtra and its nominees. The Directors of the company are nominees of C.I.D.C.O, and employees of C.I.D.C.O, or the Government of Maharashtra. The company was carrying on business of public transport which business can only be carried on by the Government or Government Com panies and/or Corporations and which would be a function of the Government in a welfare society. The company, at the time it was carrying on business, was in fact enjoying a monopoly status which was State conferred and/or State protected. It may be noted that even today except for the M.S.R.T.C, and B.E.S.T there is no other organisation or company which is permitted to and/or runs any public transport service in this region. It is also pertinent to note that while the petitioners ran 28 routes, M.S.R.T.C and B.E.S.T run only two routes each. The village panchayats of a number of villages in Thane and Raigad Districts have passed resolutions demanding the restarting of bus services by the petitioner-company. Thus the vague statement in the petition that the transport service rendered by M.S.R.T.C and B.E.S.T are acclaimed as adequate by the public is falsified completely. Major decisions such as the routes to be run, the fares to be charged, were State controlled. This control is all the more clear when one notices that even copies of resolutions of Board of Directors are sent to State Government and finally the company was undoubtedly carrying on a function of great public importance.

27. On its incorporation all the assets and employees of C.I.D.C.O, in the transport section were transferred to the petitioners' predecessors. Up to the date of the passing of the resolution the petitioners enjoyed rent-free accommodation and space in premises belonging to C.I.D.C.O The main source of income of the petitioner-company has been loans from C.I.D.C.O to the extent of Rs. 5,02,56,143 and Rs. 40,22,527 and a loan from B.M.R.D.A, to the extent of Rs. 1,12,60,961 (against hypothecation of 50 buses) and an overdraft from State Bank of India in a sum of Rs. 24,89,936. The overdraft has been granted on the basis of a deposit of Rs. 40 lakhs kept by the petitioners with the State Bank of India (which amount of Rs. 40 lakhs has been borrowed by the petitioners from C.I.D.C.O as mentioned above). It may also be noticed that even during the year in which petitioners had labour problems, the petitioner-company had earned by way of:

(a) traffic earnings, a sum of Rs. 3,92,61,316;

(b) interest in a sum of Rs. 4,79,924; and

(c) had miscellaneous receipts of Rs. 2,16,631.

But the main source of income of the petitioners has been C.I.D.C.O and B.M.R.D.A The statement showing the financial position of the company annexed to the affidavit, dated 19 February 1987, shows that the loan given by B.M.R.D.A has been paid off and effectually the only creditor is C.I.D.C.O who has been shown as an unsecured creditor in a sum of Rs. 9,26,79,875. On affidavit no explanation is given as to how the petitioners who were supposed to be incapable of raising any moneys could get paid off a loan of Rs. 1,12,60,912 but the auditors' report for the year ended 31 March 1985, shows that C.I.D.C.O has paid this amount to B.M.R.D.A on behalf of petitioners. In fact it strikes the Court immediately if this amount could be paid off, the business could easily have been started as even according to the petitioners all that was required to start the business was a sum of Rs. 1 crore. It is also significant to note that it is not averred anywhere in the petition or on affidavit that either B.M.R.D.A and/or C.I.D.C.O were pressing the petitioner-company for a repayment of these loans. In fact as seen above C.I.D.C.O has paid off on behalf of the petitioners a sum of Rs. 1,12,60,912. Sri Dwarkadas tried to explain this. However, in view of the fact that the petitioners had been given an opportunity to file a further affidavit and had in fact filed two further affidavits and as this was not explained on affidavits, I have not permitted. Sri Dwarkadas to explain this situation. In the balance sheet of the year 1984, apart from the two corporations and the liability to workmen there were also sundry creditors to the tune of Rs. 22,297, deposits from contractors to the tune of Rs. 74,115, other deposits to the tune of Rs. 6,84,777, other liabilities to the tune of Rs. 8,10,976, water charges to the tune of Rs. 10,14,728. In the balancesheet for the subsequent year, that is, year ending 31 March 1985, the only sundry creditors are to the tune of Rs. 5,915, deposits from contractors only in a sum of Rs. 16,283, other deposits only in a sum of Rs. 1,89,052. It is clear that the sundry creditors, deposits from contractors and other deposits have to a very large extent also been paid off. No explanation is given on affidavit how these were paid off. The claim that liabilities fat-exceed assets is based mainly on the fact that a sum of Rs. 9,29,79,875 is shown payable to C.I.D.C.O, the petitioner holding company.

28. Further it is significant to note that the loan from B.M.R.D.A, was on the basis of hypothecation of 50 buses. The company admittedly had a fleet of 200 buses which even according to the written down value as per statement annexed to affidavit, dated 19 February 1987, are of the value of Rs. 1,78,63,007. There is nothing to show that these could not have been hypothecated and/or that a loan could not be raised against them. This coupled with the fact that an arrangement has been entered into with M.S.R.T.C to sell 50 buses to them at book value and delivery is given to M.S.R.T.C and M.S.R.T.C is running these buses, shows that buses have not in fact deteriorated to the extent that they cannot be used and/or are unserviceable. On the contrary the fact that M.S.R.T.C is able to use them shows categorically that the buses are still in running order.

29. Further nowhere has it been averred that the business was such that it could not be run at a profit and/or that there was no reasonable hope or possibility of ever running the business at a profit. Also there are no averments that attempts have been made to raise monies and that it has not been possible to do so and/or that in spite of all efforts the business could not be restarted.

30. It must be mentioned that before me also all the workmen were willing to give similar undertakings as already given to the Industrial Court and to this Court in Writ Petition No. 5070 of 1984, but I found that there was no corresponding willingness on the part of the petitioners to even make an attempt at running the business and Sri Dwarkadas in his usual fairness has stated that the decision to close down having been taken there were no attempts made to restart the business nor was the possibility considered.

31. Sri Dwarkadas has submitted that once a ground under Ss. 433(a) to 433(c) is made out the Court has no option but to order a winding-up of the company and the only discretion which a Court has is under S. 433(f). Sri Dwarkadas for this purpose relied on a decision of this High Court in the case of In Re: Advent Corporation (Private), Ltd., [(1969) 39 Comp. Cases 463] wherein the learned Judge holds as follows at page 473:

“… In my opinion, the mere use of the word ‘may’ in S. 433 of the Companies Act cannot lead to the conclusion that the Court can decline to make a winding-up order even in cases in which the petitioner is entitled to the same exdebito justitiae. In this connection, it may be pointed out that S. 434(1)(a) of the Companies Act does not merely lay down a presumption, which can be rebutted, but uses the word ‘shall’ and enacts a deeming provision which must come into play once the company neglects to pay the sum demanded by the statutory notice to which it refers. Sri Bhabha also relied on the provisions of S. 443(2) of the Companies Act. Sub-section (1) of that section lays down the various orders which the Court can make at the hearing of a winding-up petition. Sub-section (2) thereof, however, enacts that where the petition is presented on the ground that it is just and equitable that the company should be wound up, which is the ground mentioned in S. 433(f), the Court can refuse to make winding-up order if it is of opinion that some other remedy was available to the petitioners and the petitioners were acting unreasonably in seeking to have the company wound-up instead of pursuing that other remedy. Sri Bhabha, sought to contend that S. 443(2), therefore, shows that the making of a winding-up order is a matter resting in the discretion of the Court. I am afraid S. 443(2), far from supporting Sri Bhabha in that contention, goes against him, for it says that the discretion to refuse a winding-up order is conferred on the Court only in cases falling within Cl. (f) of S. 433, by clear implication, it negatives discretion in cases falling within any of the other clauses of S. 433. There is good reason why that should be so. The reason is that Cls. (a) to (c) of S. 433 lay down grounds which are specific in nature. When those grounds are made out, Cl. (f) of S. 433 on the other hand, is a residuary clause of an ‘elastic’ nature and it is for that reason that S. 443(2) confers an equally ‘elastic’ discretion onthe Court…”

However, it must be noted that these observations have been made on a petition filed by a creditor and the learned Judge holds that there is no discretion because of the presumption that arises under S. 434(1)(a). In the present case, no such presumption is available to the petitioners. Further this Court has in numerous cases, time and again laid down the grounds and consideration on which discretion of the Company Court to wind up a company on any of the grounds under Ss. 433(a) to 433 (f) of the Companies Act is to be exercised and further with great respect to the learned Judge, I think, these observations are in fact contrary to the bare reading of the section itself. Sri Dwarkadas also cited a number of cases in order to show that if the company is commercially insolvent, the Court must wind-up the company. The cases cited by Sri Dwarkadas are the cases of V.V Krishna Iyer Sons v. New Era Manufacturing Company, Ltd., [(1965) 35 Comp. Cases 410], Delhi Auto mobiles (Private), Ltd. v. Maruti Ltd., [(1978) 48 Comp. Cases 676], M. Gordhandas and Company v. M.W Industries, [(1971) 3 SCC 632 : A.I.R 1971 S.C 2600]. In Re: Cine Industries and Recording Company, [A.I.R 1942 Bom. 231], Registrar of Companies v. Shreepalpur Cold Storage (Private), Ltd., [(1974) 44 Comp. Cases. 479] and In Re: Central India Spinning, Weaving and Manufacturing Company, Ltd., [88 Bom. L.R 226]. Sri Dwarkadas relies on these cases to show that once liabilities exceed assets the substratum of the company is gone and the company must be wound up. However, this is only one test and all these cases lay down the ratio that in determining whether or not the substratum of the company has gone, the objects of the company and the case of the company on that question have to be looked at; that the mere fact that trading losses have been incurred is not enough to show that the substratum of the company has disappeared; that the financial incapacity has to be proved as a matter of fact and that it has got to be established that there is no reasonable prospect of the company ever making profit or carrying out the objects for which it was established. As pointed out hereinabove the petitioners have failed to establish any of these. The last ground is that it is just and equitable that the company should be wound up. In my view, this is a fit case where on the facts and under the circumstances as mentioned hereinabove it is absolutely just and equitable that the order prayed for should be refused. This is particularly so when it is noted that the company is an agent of the State performing functions which would otherwise have to be performed by the State and the interest of the public undeniably requires that the petitioner-company be restarted. As seen earlier out of the 28 routes run by the petitioners, the B.E.S.T and Maharashtra State Road Transport Corporation are today only running four routes.

32. Sri Ganguli has also submitted that in circumstances like this, the corporate veil has to be lifted and the petitioners cannot seek to wind themselves up by claiming financial inability when in fact the Government and C.I.D.C.O, are behind the petitioners and meeting all expenses required for running of the petitioners. Sri Dwarkadas on the other hand has submitted that the Courts have lifted the corporate veil only in cases where questions of fundamental rights arise and even though a company may be held to be an instrumentality or agency of the State for the purpose of Art, 12 of the Constitution, it may not be deemed to be an agent of the State for the purposes of other articles of the Constitution. Sri Dwarkadas has submitted that at no time for the purposes to winding up of a company has the corporate veil been lifted. According to Sri Dwarkadas any other interpretation would lead to a situation where such a company would then on a petition by a creditor take up the defence that even though its balance sheet showed that it was commercially insolvent it had the financial backing of the State and, therefore, could not be wound up.

33. Sri Dwarkadas also relied upon a case of Western Coalfields Ltd. v. Special Area Development Authority, [(1982) 1 SCC 125 : A.I.R 1982 S.C 697] and argued that even though the petitioners may be a Government company within the meaning of S. 617 of the Companies Act, they still had a separate existence; that the law recognised the petitioners as a juristic person separate and distinct from its members; that merely because the entire share capital of the petitioner-company was contributed by the Government and all its shares were held by the Government and all its Directors were all officers of the Government did not make any difference to the company's application to wind itself up.

34. In my view Sri Dwarkadas has a point. For the purposes of winding-up, it is the financial position of the company itself that the Court has to consider. But in this case as already set out hereinabove, the petitioners have failed to make out any case for winding-up.

35. Moreover, as pointed out by Bhagwati, J., as he then was in the case of Sri Ramana Dayaram Shetty v. International Airport Authority of India, [1981 — I L.L.N 270],

“… So far as India is concerned, the genesis of the emergence of corporations as instrumentalities or agencies of Government is to be found in the Government of India Resolution on Industrial Policy, dated 6 April 1948, where it was stated, inter alia, that ‘management of State enterprise will as a rule be through the medium of public corporations under the statutory control of the Central Government who will assume such powers as may be necessary to ensure this.’ It was in pursuance of the policy envisaged in this and subsequent resolutions on industrial policy that corporations were created by Government for setting up and management of public enterprises and carrying out other public functions. Ordinarily these functions could have been carried out by Government departmentally through it service personnel, but the instrumentality or agency of the corporation was resorted to in these cases having regard to the nature of the task to be performed. The corporation acting as instrumentality or agency of Government would obviously be subjected to the same limitations in the field of constitutional and administrative law as Government itself, though in the eye of the law, they would be distinct and independent legal entities. If Government acting through its officers is subject to certain constitutional and public law limitations, it must follow a fortiori that Government acting through the instrumentality or agency of corporations should equally be subject to the same limitations.”

And Sri Krishna Iyer, J., in the case of Som Prakash Rekhi v. Union of India, [1981 — I L.L.N 322], whilst dealing with Government Companies has laid down in Para. 23 at page 328;

“Although corporate personality is not a modern invention, its adaptation to embrace the wide range of industry and commerce has a modern flavour. Welfare States like ours called upon to execute many economic projects readily resort to this resourceful legal contrivance because of its practical advantages without a wee-bit of diminution in ownership and control of the undertaking. The true owner is the State, the real operator is the State and the effective controllerate is the State and the accountability for its actions to the community and to Parliament is of the State. Nevertheless distinct juristic person with a corporate structure conducts the business, with the added facilities enjoyed by companies and keeping the quasi-autonomy which comes in handy from the point of view of business management. Be it remembered though that while the formal ownership is cast in the corporate mould, the reality reaches down to State control…”

And in Para. 25 at page 329 it is laid down:

“This is the well-worn legal strategy for Government to run economic and like enterprises. We live in an era of public sector corporations, the State being the reality behind. Law does not hoodwink itself and what is but a strategy cannot be used as a strata gem.”

Again in Para. 30 at page 330, and in Para. 41 at page 336 and 91, it is stated as:

“…The true test is functional. Not how the legal person is born but why it is created. Nay more. Apart from discharging functions or doing business as the proxy of the State, wearing the corporate mask there must be an element of ability to affect legal relations by virtue of power vested in it by law.

We may point out here that when we speak of a corporation being an instrumentality or agency of Government, we do not mean to suggest that the corporation should be an agent of the Government in the sense that whatever it does should be binding on the Government. It is not the relationship of principal and agent which is relevant and material but whether the corporation is an instrumentality of the Government in the sense that a part of the governing power of the State is located in the corporation and though the corporation is acting on its own behalf and not on behalf of the Government, its action is really in the nature of State action.”

The Supreme Court has in a number of cases and as enumerated in the case of Central Inland Water Transport Corporation, Ltd. v. Tarun Kanti Sengupta, [1986 — II L.L.N 382] laid down certain tests for determining whether a corporation or company is or is not an instrumentality or agent of the State, namely:

(1) One thing is clear that if the entire share capital of the corporation is held by Government it would go a long way towards indicating that the corporation is an instrumentality or agency of Government.

(2) Existence of deep and pervasive State control may affect an indication that the corporation is a State agency or instrumentality.

(3) It may also be a relevant factor…whether the corporation enjoys monopoly status which is State conferred or State protected.

(4) If the functions of the corporation are of public importance and closely related to Governmental functions, it would be relevant factor in classifying the corporation as an instrumentality or agency of Government.

(5) Specifically, if a department or Government is transferred to a corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government.

In this case there is not the slightest doubt that most of these conditions apply to the petitioner-company and that were the Court considering whether the petitioners were a State within the meaning of Art. 12, the answer would have been an emphatic “Yes.” In this case as already set out hereinabove, it is clear that the whole purpose of this petition is to implement a decision taken by the Government to close down the petitioner-company and to achieve this object in whatever manner possible. Even when applications for closure under S. 25 of the Industrial Disputes Act have been refused, without any regard for the interest of the public and in utter disregard of and contrary to representations made, attempts at closure are pursued single mindedly and doggedly. Under these circumstances there is no doubt that this petition is not only, mala fide but also an abuse of the process of Court. I have in this case refrained from laying down a wide and broad proposition which might affect so many other companies, but again in the words of the Supreme Court in the case referred to above:

“It is dangerous to exonerate corporations from the need to have constitutional conscience; and so, that interpretation, language permitting, which makes Governmental agencies, whatever their mien, amenable to constitutional limitations must be adopted by the Court as against the alternative of permitting them to flourish as an imperium in imperia.”

Whilst these observations are in context of Art. 12 of the Constitution, even in other cases, if resort such as this is sought to be taken, in utter disregard of its duties and obligations to its citizens, the conscience of these corporations and for companies and the powers behind them would have to be rudely awakened and enforced.

36. There is however one other point which has been raised by Sri Ganguli and Sri Khankar and by reason of which also I think the petition must fail.

37. Sri Ganguli has submitted that the winding-up of a company results in a closure of the company; that under S. 445(3) of the Companies Act, the services of the employees of the company are deemed to have been terminated on the passing of a winding-up order, there is, therefore, a conflit betweeen the provisions of the Companies Act and the provisions of S. 25-O of the Industrial Disputes Act. Sri Ganguli submits that in these circumstances the provisions of the Industrial Disputes Act should prevail as it is a beneficial legislation and also because it is a legislation which deals specifically with the relationship between an employer and an employee. According to Sri Ganguli and Sri Khankar, the Companies Act is a legislation which deals with the companies, but does not specifically deal with the relationship between an employer and an employee and, therefore, so far as the relationship between an employer and an employee are concerned, the Companies Act is a general Act. In this behalf Sri Ganguli has referred to the case of Damji v. Life Insurance Corporation of India, [A.I.R 1966 S.C 135], wherein there was a conflict between the provisions of S. 41 of the Life Insurance Corporation Act and the Companies Act, and it was held that the jurisdiction of the company Court was barred. In my opinion, this case wilt not assist Sri Ganguli because in this case, S. 41 of the Life Insurance Corporation Act gave an exclusive jurisdiction and it is by reason of that exclusive jurisdiction that the jurisdiction of the company Court was excluded. In the present case, the Industrial Disputes Act does not give any such exclusive jurisdiction to the appropriate authority. Sri Ganguly thereafter referred to the case of K.C.P Employees' Association, Madras v. K.C.P Ltd., [1973 — I L.L.J 322], wherein it is provided that in all cases of conflict and/or doubt, the benefit must be given to the weaker section of the community. I am afraid that this case also does not help Sri Ganguli much because if there was a doubt as to the interpretation of any particular provision, then the question of giving a benefit would arise. But if there are clear provisions of law, then those provisions of law will have to be enforced by the Court. Sri Ganguli thereafter referred to the case of Life Insurance Corporation of India v. D.J Bahadur, [1980 — II L.L.N 575], where there was a conflict between the provisions of the Life Insurance Corporation Act and the Industrial Disputes Act and it was held in that case that the Industrial Disputes Act being a beneficial legislation the provisions of the Industrial Disputes Act must prevail and Sri Ganguli also referred to cases of In re: Shree Madhav Mills Ltd., [1966 — II L.L.J 827] and S.G Chemicals and Dyes Trading Employee's Union v. S.G Chemicals and Dyes Trading, Ltd., [1986 — 1 L.L.N 986], wherein there were conflicts between the provisions of the Companies Act and the Industrial Disputes Act and it has been held that the provisions of the Industrial Disputes Act must prevail as that is a beneficial legislation. Sri Dwarkadas on the other hand has submitted that there is no conflict between the provisions of the Companies Act and the Industrial Disputes Act at all, and in support of his argument, he gave the following propositions:

(1) Under the Companies Act, a company may be wound up in one of several ways and circumstances.

(2) Winding-up under the Companies Act is not confined only to cases where the company is in insolvent circumstances, but it could be for any reasons contained in Ss. 433(a) to 433(d) and 433(f), or where to wants, re-incorporation with extended objects or amalgamation with one or more companies.

(3) Winding-up on the ground that company is commercially insolvent is only one of the reasons for winding-up.

(4) In any event, the object of winding-up is to dissolve the company so that its assests are realised and applied in payment of its debts, and if there is any surplus, the same is paid back to the contributories.

(5) The different mode of winding-up envisaged by the Companies Act are enumerated in S. 425 of the Companies Act, and they are as follows:

(i) by the Court,

(ii) voluntary winding-up,

(iii) subject to the supervision of the Court.

(6) The effect of winding-up by any one of the aforesaid three methods is the same, viz., dissolution of the, company.

(7) Chapter 5 which contains provisions for payment of debts and provides for preferential payments applies to every mode of winding-up. Under S. 530 of the Companies Act workers are preferred creditors.

(8) A provision similar to S. 445(3), which is merely a procedural provision is not found in any of the other modes or methods of winding-up.

(9) The argument that by virtue of S. 445(3) there is a clear conflict between S. 25-6 of the Industrial Disputes Act and S. 445 of the Companies Act, is unsustainable because in the case of winding-up by any of the other two modes it would not result in a conflict.

(10) In fact there is no conflict between the provisions contained in S. 445(3) of the Companies Act and S. 25-O of the Industrial Disputes Act.

(11) Section 25-O comes into play before closure can take place. Section 445(3) comes into effect only in the case for windng-up by Court and after the final winding-up order has been passed.

(12) Provisions of Chapter V-B in which S. 25-O of the Industrial Disputes Act is contained are applicable only to certain industrial establishments, viz., as defined in Ss. 25K and 25L of the Industrial Disputes Act.

(13) The Companies Act applies only to a company incorporated under this Act, regardless of the nature of the companies or the employees employed.

(14) Section 25-O(1) proviso carves out an exemption in respect of certain undertaking set up for construction of buildings, bridges, road, canals, dams or other construction works.

(15) A company may carry on several business, only one of which may be an industrial establishment within the meaning of the Industrial Disputes Act. The words closure of an undertaking of an industrial establishment clearly suggest closure of even a part of an industrial undertaking.

(16) Therefore, only a company desirous of closing down an undertaking of an industrial establishment would have to comply with S. 25-O of the Industrial Disputes Act and obtain permission. The same company could legitimately carry on its other business, which would remain unaffected by the closure.

(17) Under the Companies Act the word Court, has been defined under S. 2(11). Under this sub-section the jurisdiction to wind up a company is exclusively conferred on the High Court or on the District Court. .

(18) To hold that winding-up can only be subject to permission under S. 25-O would imply that the exclusive jurisdiction of the High Court is displaced and the same would be subject to the permission of the appropriate Government under the Industrial Disputes Act in any of the cases covered by Ss. 433(a) to 433(f).

38. In my view, these propositions do not answer the point as raised. There is no doubt that to the extent that one of the effects of winding-up is that there is a closure of an undertaking and so long as that undertaking is covered by the provisions of S. 25L of the Industrial Disputes Act and an application is made by the company for winding itself up, there would be a conflict between the provisions of the Companies Act and the Industrial Disputes Act. There is in my mind not the slightest doubt that in such cases the provisions of the Industrial Disputes Act will have to prevail. This is not only because the Industrial Disputes Act is a beneficial legislation but also because in respect of relationship between employees and employer it is the legislation which is more special legislation whereas in this respect the Companies Act is merely a general legislation. There is also another reason and that is that in all such cases where the provisions of two acts or two provisions of the same act cannot stand together and are in conflict, then the provision which has been legislated later must always prevail. Section 25-O of the Industrial Disputes Act as it now stands where introduced in 1976 and it is, therefore, the later legislation and for that reason also it must prevail.

39. In the present case as has been seen from the facts mentioned above in fact the petitioners have applied under S. 25-O of the Industrial Disputes Act and that application stood rejected not once but twice and it is only thereafter that they have filed this winding-up petition. In view of the fact that no permission under S. 25-O has been obtained by the petitioners and the provisions of the Industrial Disputes Act have to prevail over the Companies Act the company cannot be allowed to be wound-up. For this reasons also the petition will have to stand dismissed.

40. One further point which has been taken up by Sri Ganguli is that the provisions of the companies act relating to winding-up of a company are contrary to Arts. 21, 39A and 41 of the Constitution of India in so far as the workers have a right to livelihood as guaranteed under these articles. I do not propose to deal with this argument as in this particular case as there is no necessity for dealing with the same.

41. Under the circumstances, the petition stands dismissed with costs.