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Attorney(S)
  • U.N.Sinha
  • Tara Kumar Das
  • Ranen Roy
  • Krishna Prasad Sinha
  • A.B.N.Sinha
Judges
  • Ramaswami, C.J
  • Raj Kishore Prasad, J.
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Citation Codes
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citation codes
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Attorney(S)
  • U.N.Sinha
  • Tara Kumar Das
  • Ranen Roy
  • Krishna Prasad Sinha
  • A.B.N.Sinha
Judges
  • Ramaswami, C.J
  • Raj Kishore Prasad, J.
Acts
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Smart Summary

Judgment Summary — Ramaswami, C.J. (with Raj Kishore Prasad, J. concurring)

Factual and Procedural Background

The petitioner, S.K.G. Sugar Ltd., obtained a rule from the High Court seeking certiorari to quash Miscellaneous Cases Nos. 26 and 27 of 1955, pending before the Industrial Tribunal under section 33-A of the Industrial Disputes Act.

Background facts given in the opinion: Gaya Sugar Mills Ltd. (a company under the Indian Companies Act) owned a sugar factory at Guraru. On 4 November 1951 the High Court ordered compulsory winding up of that company; on 1 February 1952 the High Court appointed Mr. Dhansukh Lal Mehta as Official Liquidator. On 3 December 1954 the High Court permitted the Official Liquidator to lease the Guraru factory to the petitioner for the period 5 December 1954 to 14 November 1955. The petitioner took possession on 6 December 1954 and began working the factory.

On 2 December 1954 the State Government had referred an industrial dispute between Gaya Sugar Mills Ltd. and certain workmen to the Industrial Tribunal under section 10(1) of the Industrial Disputes Act. The Tribunal's award was given on 25 March 1955; an appeal to the Labour Appellate Tribunal was later decided on 31 August 1956.

On 7 April 1955 the petitioner received notices that respondents 4 to 23 had filed Misc. Cases Nos. 26 and 27 of 1955 under section 33-A, alleging that the petitioner had discharged the workmen or changed their service conditions during the pendency of adjudication proceedings. The petitioner sought to quash those miscellaneous proceedings.

Legal Issues Presented

  1. Whether the State Government was required, before making a reference under section 10(1) of the Industrial Disputes Act, to obtain leave of the High Court under section 171 of the Companies Act when the employer was a company in winding up.
  2. Whether the petitioner (a lessee who took possession after the State's reference) could be proceeded against under sections 33 or 33-A of the Industrial Disputes Act, despite not being a party to the original reference.
  3. Whether the Official Liquidator had to be made a party to the reference under section 10(1), and whether omission or delay in serving notice on the Official Liquidator vitiated the Tribunal's jurisdiction.

Arguments of the Parties

Petitioner's Arguments

  • The State Government's reference under section 10(1) was a "legal proceeding" within the meaning of section 171 of the Companies Act; therefore, the State Government was required to apply to the High Court for leave before making the reference.
  • Because the reference was said to be made without leave, the proceedings before the Industrial Tribunal were incompetent and a nullity; consequently, proceedings under section 33-A were also incompetent.
  • The petitioner, having obtained a lease after the reference, was not a party to the industrial dispute that was the subject matter of the reference; therefore, sections 33 and 33-A could not be invoked against it.
  • The Official Liquidator was not made a party to the reference and was not given timely notice by the Industrial Tribunal; this omission was argued to affect jurisdiction.

Respondents' Arguments

  • Respondents (through counsel Mr. Ranen Roy) relied upon authorities (Shukantla v. Peoples Bank of Northern India Ltd., AIR 1941 Lah 392; and Benares Bank v. Sashibhusan, AIR 1948 Pat 398) for the proposition that the phrase "other legal proceeding" in section 171 should be construed ejusdem generis — i.e., limited to original court proceedings analogous to a suit.
  • More generally, respondents opposed the petitioner's contention that the State Government's reference was invalid for want of leave under section 171 and defended the jurisdiction and competence of the Industrial Tribunal proceedings and consequent section 33-A actions.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Governor-General in Council v. Shiromani Sugar Mills Ltd., AIR 1946 F.C. 16 Held that the expression "or other legal proceeding" in section 171 should be given a wide construction — not confined to original court proceedings; it covers "any proceeding prescribed by law and in pursuance of law" (and thus could include actions like those under s. 46(2) Income-tax Act). The judgment was discussed as supporting a broad construction of "legal proceeding." The Court accepted the Federal Court's construction as having persuasive force and assumed, for the sake of argument, that the State's reference under s.10(1) could be a "legal proceeding" within s.171, but ultimately held s.10(1) is not controlled by s.171 for reasons of statutory purpose and repugnancy.
Shukantla v. Peoples Bank of Northern India Ltd., AIR 1941 Lah 392 Advocated a narrow (ejusdem generis) reading of "other legal proceeding" in section 171 — i.e., limited to original judicial proceedings analogous to a suit. The Court rejected reliance on this decision because it had been expressly overruled by the Federal Court decision in AIR 1946 F.C. 16.
Benares Bank v. Sashibhusan, AIR 1948 Pat 398 Applied the narrow reading (following AIR 1941 Lah 392) of "legal proceeding" in s.171. The Court treated this decision as of little authoritative value because it was based upon a decision that had been overruled by the Federal Court (AIR 1946 F.C. 16).
In re Pontypridd and Rhondda Valleys Tramways Co. Ltd. (1859) 58 LJ Ch. 536 Held that a Companies Act provision corresponding to s.171 did not apply to an inquiry under the Tramways Act (i.e., certain statutory inquiries by public authorities were not caught by the Companies Act provision). The Court cited this Chancery decision to support the view that s.171 should not be applied to inquiries or proceedings initiated under other statutory schemes (here, the Industrial Disputes Act), thereby reinforcing the avoidance of a construction producing absurd results.
S.N. Mukherjee v. Krishna Dassi, AIR 1933 Cal 433 Decision cited as being to a similar effect — i.e., supporting the non-application of the Companies Act provision to certain statutory inquiries. The Court relied upon this authority as additional support for the conclusion that s.171 does not control statutory references made by government/statutory bodies under other enactments.
R.G.N. Price v. M. Chandrasekharan, AIR 1951 Mad 987 (observation of Rajamannar, C.J.) Contains an observation that section 171 of the Indian Companies Act would have no application to enquiries, investigations and orders made by Government or statutory bodies in exercise of statutory powers. The Court cited this observation to buttress its view that s.171 should not be read as restricting statutory powers of government/statutory bodies under other enactments such as the Industrial Disputes Act.

Court's Reasoning and Analysis

The Court proceeded in several analytical steps, grounded on the language of the statutes and established authorities:

  1. The Court reproduced section 171 of the Companies Act, which restrains "suit or other legal proceeding" against a company in winding up except by leave of the Court.
  2. The Court acknowledged the Federal Court decision in AIR 1946 F.C. 16, which construed "other legal proceeding" widely to include proceedings prescribed by law (and specifically gave an example that the Income-tax Department would have to seek leave before action under s.46(2) of the Income-tax Act). The Court accepted this as a correct statement of the wider possible meaning of "legal proceeding" and, for present purposes, assumed arguendo that a reference under section 10(1) might fall within that meaning.
  3. Even assuming the reference could be a "legal proceeding" within s.171, the Court held that section 10(1) of the Industrial Disputes Act is not controlled by section 171. The Court analyzed the language and object of s.10(1): the State Government may, when of opinion an industrial dispute exists or is apprehended, refer it to a Tribunal; the only statutory condition is the Government's opinion. The proviso to s.10(1) imposes a statutory duty to make a reference when a public utility dispute has a notice under s.22 (unless frivolous).
  4. The Court found a repugnancy or inconsistency between the mandatory statutory power/duty under s.10(1) and the requirement in s.171 that leave of the High Court be obtained before prosecuting "legal proceedings" against a company in winding up. If s.171 were held to apply, the State might be unable to perform its statutory duty under the Industrial Disputes Act where the High Court refused leave — an interpretation that would nullify the Industrial Disputes Act's object of maintaining industrial peace.
  5. Applying the principle that a construction producing a "strange and absurd result" should be avoided, the Court concluded that s.10(1) is not governed by s.171 and the State Government need not apply for leave under s.171 before making a reference under s.10(1).
  6. The Court supported this conclusion by reference to authorities (the Chancery decision on the Tramways Act, S.N. Mukherjee, and the observation in R.G.N. Price) which indicate that s.171 (or its counterpart) does not extend to statutory inquiries, investigations or orders made by governmental/statutory bodies in exercise of statutory powers.
  7. On the second issue (whether the petitioner could be proceeded against under ss.33/33-A despite not being a party to the original reference), the Court analyzed the statutory language of ss.33 and 33-A and found the expression "employer" to be unqualified. It held that it is sufficient, for the application of ss.33/33-A, that the employer–employee relationship existed at the time of the discharge, punishment or alteration of conditions to the workman's prejudice; it is not necessary that the employer be the identical employer named in the original reference.
  8. The Court reasoned that the petitioner's construction (limiting liability only to the employer who was the subject of the original reference) would produce an unjust result: the lessor would be saddled with liability even if he was not the employer at the time the prejudicial acts occurred. This would be contrary to the statute's object of protecting workmen against victimization.
  9. Regarding the Official Liquidator's participation, the Court noted the order of reference (annexure E) specifically mentioned Gaya Sugar Mills of Guraru in Appendix I. The Court observed that the company continues to be a legal personality despite winding up, so it was proper to make the company a party; it was not necessary to make the Official Liquidator separately a party. The Court also found that notice was in fact given to the Official Liquidator on 11 January 1955 (albeit possibly late) and the award was made on 25 March 1955 — therefore there was no jurisdictional defect.

Holding and Implications

HOLDING: The application for a writ under Article 226 of the Constitution was dismissed. The Court held that:

  • The State Government is not required to obtain leave of the High Court under section 171 of the Companies Act before making a reference of an industrial dispute under section 10(1) of the Industrial Disputes Act.
  • The petitioner (lessee who took possession after the reference) could be proceeded against under sections 33 and 33-A provided the employer–employee relationship existed at the time of the alleged discharge, punishment or alteration of service conditions.
  • The omission to make the Official Liquidator a separate party did not vitiate the proceedings because the company remained a legal entity and notice to the Official Liquidator was shown to have been given on 11 January 1955.

Consequential orders (as given in the opinion):

  • The application was dismissed with costs.
  • Hearing fee of Rs. 200 to be shared equally between opposite parties 1 and 2 on one hand and opposite parties 4 to 23 on the other hand.

Implications: The opinion addresses the direct effect on these parties (dismissal of the petition and cost allocation). The opinion does not state that it establishes a new binding precedent beyond the interpretations applied; it reasons by reference to existing authorities and statutory construction to reach its conclusion.

This summary is prepared strictly from the content of the provided court opinion and does not add facts or inferences not present in the text.

Show full summary ...

    S.K.G Sugar Ltd. v. Ali Hassan And Others Opposite Party.

    Ramaswami, C.J:— In this case the petitioner, S.K.G Sugar Ltd., has obtained a rule from the High Court calling upon the respondent to show cause why Miscellaneous cases nos. 26 and 27 of 1955, pending before the Industrial Tribunal under section 33-A of the Industrial Disputes Act, should not be quashed by a writ in the nature of certiorari.

    2. Cause has been shown by the learned Government Pleader on behalf of respondents 1 and 2 and the learned Counsel on behalf of the respondents 4 to 23 appearing through the Secretary of the Chini Mazdoor Sangh.

    3. It appears that the Gaya Sugar Mills Ltd., which is an incorporated Company under the Indian Companies Act, owned a sugar factory at Guraru in the district of Gaya. On the 4th of November, 1951, there was an order made by the High Court for the compulsory winding up of this Company. On the 1st of February, 1952, the High Court made a subsequent order appointing respondent no. 3, Mr. Dhansukh Lal Mehta, as Liquidator. On the 3rd of December, 1954, the High Court granted permission to the official Liquidator to execute a lease of the sugar factory at Guraru in favour of the petitioner for the period from the 5th of December, 1954, up to the 14th of November, 1955. It is said that the petitioner took possession of the sugar factory from the Official Liquidator on the 6th of December, 1954, and commenced working of the factory. It appears that a few days before, that is, on the 2nd of December, 1954, the State Government had referred an industrial dispute between the Gaya Sugar Mills Ltd. and certain workmen employed in the sugar factory to the Industrial Tribunal under section 10(1) of the Industrial Disputes fret. The award of the Tribunal was given on the 25th of March, 1955, but there was an appeal taken to the Labour Appellate Tribunal and the appeal was decided on the 31st of August, 1956.

    4. On the 7th of April, 1955, the petitioner received notices from the Industrial Tribunal to the effect that respondents 4 to 23 had filed two miscellaneous cases nos. 26 and 27 of 1955, under section 33-A of the Industrial Disputes Act, alleging that the petitioner had either discharged the workmen or changed their service conditions during the pendency of the adjudication; proceedings.

    5. The argument of the petitioner is that the State Government ought to have taken the leave of the High Court under section 171 of the Companies Act before making a reference of the industrial dispute under section 10(1) of the Industrial Disputes Act. It was submitted on behalf of the petitioner that an order for the compulsory winding up of the Gaya Sugar Mills Ltd. (to be hereinafter called the “lessor”) was made by the High Court on the 4th of November, 1951.

    6. It was submitted that the reference made by the State Government under section 10(1) was “a legal proceeding” within the meaning of section 171 of the Companies Act and it was incumbent on the State Government to apply for permission of the High Court before making the reference. The point taken by the petitioner was that the reference made by the State Government was incompetent and the proceedings taken by the Industrial Tribunal were a nullity in the eye of law. It was, therefore, contended that the proceedings taken under section 33-A were also in competent. The argument of learned Counsel is based upon section 171 of the Companies Act which is in the following terms:—

    “171. Suits stayed on winding up order.— When a winding up order has been made or a provisional liquidator has been appointed no, suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose.”

    7. In this connection Counsel on behalf of the petitioner referred to the decision of the Federal Court in Governor-General in Council v. Shiromani Sugar Mills Ltd., AIR 1946 F.C 16 (A) in which it was held by the Federal Court that the expression “or other legal proceeding” in section 171 should not be confined to original proceedings in a court of first instance, analogous to a suit initiated by means of a petition similar to a plaint. It was observed by the Federal Court that section 171 must be construed with reference to other sections of the Companies Act and the general scheme of administration of the assets of the Company in Liquidation laid down by the Act.

    8. It was held by the Federal Court that the expression “legal proceeding” should not be construed in a narrow sense as the “proceedings in a court of law”. It was further held that the expression should be construed as “any proceeding prescribed by law and in pursuance of law or a legal enactment” and, therefore, action taken by the revenue authorities under section 46(2) of the Income-tax Act would be hit by section 171 and it was incumbent upon the Income-tax Department to apply to the High Court under section 171 before taking action under section 46(2) of the Income-tax Act.

    9. On behalf of the respondents Mr. Ranen Roy relied upon two decisions, namely, Shukantla v. Peoples Bank of Northern India, Ltd. AIR 1941 Lah 392 (FB) (B), and Benares Bank v. Sashibhusan*, AIR 1948 Pat 398 (C), for the proposition that the expression “legal proceeding” under section 171 of the Companies Act must be construed ejusdem generis, that is to say, as referring to original proceedings in a court of first instance, analogous to a suit, initiated by means of a petition similar to a plaint. But I can not accept this argument because the decision in AIR 1941 Lah 392 (FB) (B), has been expressly overruled by the Federal Court in AIR 1946 F.C 16 (A).

    10. The decision of the Patna High Court in AIR 1948 Pat 398 (C), is also not authoritative, for that decision is based upon AIR 1941 Lah 392 (FB) (B), which, as I have just mentioned, has been expressly overruled by the Federal Court in AIR 1946 F.C 16 (A). The decision of the Patna High Court in AIR 1948 Pat 398 (C), cannot take precedence over the decision of the Federal Court in AIR 1946 F.C 16 (A), and is, therefore, of very little authoritative value. As I have said the argument of the petitioner is based upon the decision of the Federal Court in AIR 1946 F.C 16 (A), and it was submitted that the reference made by the State Government under section 10(1) of the Industrial Disnutes Act was in the nature of “legal proceedings” contemplated by section 171 of the Companies Act. I do not wish to express in this case any concluded opinion on this point, but I shall assume in favour of the petitioner that the reference made by the State Government under section 10(1) is a legal proceeding within the meaning of section 171 of the Companies Act. Even on that assumption I do not think that the State Government is compelled to apply to the High Court for leave before making the reference under section 10(1) of the Industrial Disputes Act. There are important reasons in support of this view. It is necessary at this stage to reproduce section 10(1) of the Industrial Disputes Act:—

    “10.(1) Where the appropriate Government is of opinion that any industrial dispute exists or is apprehended, it may at any time, by order in writing,

    (a) refer the dispute to a Board for promoting a settlement thereof; or

    (b) refer any matter appearing to be connected with or relevant to the dispute to a Court for inquiry; or

    (c) refer the dispute or any matter appearing to be connected with, or relevant to, the dispute to a Tribunal for adjudication.

    Provided that where the dispute relates to a public utility service and notice under section 22 has been given, the appropriate Government shall, unless it considers that the notice has been frivolously or vexatiously given or that it would be inexpedient so to do, make a reference under this sub-section notwithstanding that any other proceedings under this Act in respect of the dispute may have commenced.”

    11. It should be noticed that under section 10(1) power is granted to the State Government to make a reference of an industrial dispute to a Tribunal for adjudication “where the State Government is of the opinion that such a dispute exists or is apprehended,” The only condition imposed by the statute for making the reference is the opinion of the State Government is that an industrial dispute exists or is apprehended. No other condition is imposed for the exercise of the statutory power. If the dispute relates to a public utility service and a notice of a strike or lock-out has been given under section 22, the State Government is under a duty to make a reference under the proviso to section 10(1).

    12. A statutory duty is imposed, upon the State Government to make a reference if the conditions mentioned in the proviso to section 10(1) are satisfied. I see no reason why the power of the State Government under section 10(1) or the statutory duty under the proviso to that sub-section should be controlled by anything in, the language of section 171 of the Companies Act. It is obvious that there is repugnancy or inconsistency between the two statutory provisions. Take a case, for example, of a public utility service where a notice of strike or lockout under section 22 has been given. A statutory duty is imposed in such a case upon the State Government to make a reference of the Industrial dispute to the Tribunal.

    13. The statutory duty is imposed by the legislature for the sake of public interest and for the preservation of industrial peace. If it is held that section 171 applies to such a case, it would be necessary for the State Government to make an application for leave to the High Court. If the High Court refuses to grant leave, then the State Government would be placed in a dilemma. If the order of the High Court is obeyed, the State Government would not be able to perform its statutory duty under the proviso to section 10(1). Such an interpretation would nullify and destroy the very object of the Industrial Disputes Act.

    14. I think that a construction of section 171 of the Companies Act leading to such a strange and absurd result should be avoided. My conclusion on this point is, therefore, that section 10(1) of the Industrial Disputes Act is not controlled by section 171 of the Companies Act and the State Government is not bound to apply for tbs leave of the High Court under section 171 of the Companies Act before making a reference of an industrial dispute under section 10(1) of the Industrial Disputes Act for adjudication of the Industrial Tribunal.

    15. This view with regard to the interpretation of section 171 is borne out by the decision of the Chancery Court in In re the Pontypridd and Rhondda Valleys Tramways Co. Ltd. (1859) 58 LJ Ch. 536 (D), in which it was held that the corresponding provision in the English Companies Act of 1862 did not apply to an inquiry under section 42 of the Tramways Act of 1842.

    16. There is a decision to a similar effect in S.N Mukherjee v. Krishna Dassi, AIR 1933 Cal 433 (2) (E). I also rely upon the observation of Rajamannar, C.J in R.G.N Price v. M. Chandrasekharan, AIR 1951 Mad 987 at p. 991 (F), where the learned Chief Justice says that in his opinion section 171 of the Indian Companies Act would have no application to enquiries, investigations and orders made either by Government or statutory bodies in exercise of statutory powers.

    17. The next argument put forward on behalf of the petitioner is that he was not a party to the Industrial dispute which was the subject matter of reference by the State Government under section 10(1) and, therefore, the petitioner could not be proceeded against under section 33 or section 33-A of the Industrial Disputes Act. The submission made by the learned Counsel on behalf of the petitioner was that the expression “employer” in section 33 and section 33-A should be construed to mean as the employer concerned in the industrial dispute which was the subject matter of reference.

    18. It was pointed out on behalf of the petitioner that the reference under section 10(1) was made by the State Government on the 2nd of December, 1954, and the petitioner had taken lease of the sugar factory from the lessor subsequently, that is, on the 3rd of December, 1954. It was also pointed out that the petitioner was not impleaded as a party before the Industrial Tribunal and it was argued that no proceeding could, therefore, be taken against the petitioner under S. 33 or S. 33-A on behalf of the aggrieved workers. I am unable to accept this argument as correct.

    19. The expression “employer” in section 33 and section 33-A is unqualified and there is no reason why any limitation should be imposed on the plain meaning of the expression. I think that it is not necessary for the application of section 33 or section 33-A that the employer who discharges or punishes the workmen or who alters the conditions of the service of the workmen should be the identical employer concerned in the industrial dispute which is the subject matter of adjudication. It is in my opinion, sufficient for the invoking of the provisions of section 33 or section 33-A that there is the relationship of employer and employee at the time the workman is discharged or punished or at the time his conditions of service are altered to his prejudice.

    20. That is I think, the correct interpretation to be placed on the language of section 33 and section 33-A. If the petitioner's argument is right, the award of the Tribunal under section 33-A could be made only against the lessor and not against the lessee. But the important point to notice is that the lessor was not in the position of an employer on the date the workmen were discharged or their conditions of service were altered to their prejudice. I see no reason why the lessor should be saddled with the liability for which he is not in any way to blame.

    21. I do not think such an unjust result could have been intended by the legislature. No such interpretation can, therefore, be placed upon the language of section 33 and section 33-A. The object of the statute is to protect the workmen against victimization by the employer and to ensure termination of the proceedings in connection with the industrial disputes in a peaceful manner. This object would be nullified if the interpretation contended for by the petitioner is accepted. In my opinion, the argument of the petitioner on this point must fail.

    22. The next question raised by the petitioner was that the Official Liquidator was not made a party to the reference made by the State Government under section 10(1) of the Industrial Disputes Act. But the order of reference under section 10(1) (annexure E) shows that Gaya Sugar Mills of Guraru was specifically mentioned as one of the parties in Appendix I. I do not think it is necessary for the State Government to make the Official Liquidator a party. The reason is that the Gaya Sugar Mills continued to be a legal personality though an order for winding up had been made.

    23. The Company had not ceased to exist as a legal entity and, therefore, the Company was properly made a party to the reference under section 10(1) of the Industrial Disputes Act. Reference was made on behalf of the petitioner to section 178 of the Companies Act; but do not think that section has any relevance in this connection. An objection was also raised on behalf of the petitioner that no notice was given to the Official Liquidator by the Industrial Tribunal before hearing the reference.

    24. The argument is not right for annexure E shows, that notice was given to the Official Liquidator on the 11th of January, 1955. It may be that notice was given late, but the award of the Industrial Tribunal was made on the 25th of March, 1955, long after the notice. I do not think there was any lack of jurisdiction and the argument of the petitioner on this point must be rejected.

    25. For these reasons I hold that there is no case made out on behalf of the petitioner for grant of a writ under Article 226 of the Constitution. In my opinion this application must be dismissed with costs.

    26. Hearing fee Rs. 200/- to be shared equally between opposite parties 1 and 2 on one hand and the opposite parties 4 to 23 on the other hand.

    27. Raj Kishore Prasad, J.:— I agree.

    R.G.D

    28. Application dismissed.

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    Comments

    S.K.G Sugar Ltd. v. Ali Hassan And Others Opposite Party.
    (Sep 20, 1956)