Civil Appeals Nos
4065 67 of 1982
Appeals by special leave from the judgments and orders dated 301181 and 1491981 of the Madras High Court in OSA No 148 of 1981 and Company Appeal Nos 880 881 of 1981
MK Ramamurthy Somyaji Ambrish Kumar Miss Nitya Ramakrishnan for the Appellants in CA
No 406582
G Vasanta Pai SN Kacker OC Mathur and DN Mishra for the Respondents in CA
4065 of 1982 and for the Appellants in CA
4066 6782
RK Garg ATM Sampath and PN Ramalingam for the Appellants in CA
4066 6782
935 VM
Tarkunde EC Aggarwala R Satish VK Pandia and TS Vishwanath Rao for the Respondent Nos 6 9 and 1114 in CA
4066 67 of 1982
OC Mathur Ravinder Narain and DN Mishra for the Respondents in CA 4065 of 1982
M Natesan and M Raghuraman for the Intervener
The following Judgments were delivered BHAGWATI J
These three appeals by special leave raise a short but interesting question of law relating to the right of workmen employed in a company to appear and oppose a petition for winding up of the company
The controversy between the parties arises out of a petition for winding up a private limited company called Ramakrishna Industries P Limited hereinafter referred to as a company
The Company has three units one a textile mill in the name of Jotie Mills which employs about 500 workmen another a workshop for manufacture of textile and other machinery which employs about 400 workmen and the third a printing press which brings out a Tamil daily called Nav India and employs about 100 workmen
It is a closed company in which there are two groups of shareholders one group consisting of respondent Nos 1 to 5 and the other consisting of respondent Nos 7 to 14
Respondent Nos 1 to 5 hold 608 shares and respondent nos
7 to 14 687 shares while the remaining 300 shares belong to a Trust in which both the groups are equally represented on the Board of Trustees
It appears that a serious dispute arose between Respondent nos
1 to 5 on the one hand and Respondent nos 7 to 14 on the other in regard to the management of the affairs of the company and since the dispute could not be settled amicably Respondent nos 1 to 5 filed a petition for winding up the Company on two grounds set out in clauses e and f of section 433 of the 
One ground was that the Company is unable to pay its debts and the other was that it is just and equitable that the Company should be wound up
The winding up petition was filed by Respondent nos
1 to 5 not only as contributories but also as creditors of the Company
Immediately on filing the winding up petition on 13th July 1981 Respondent nos 1 to 5 submitted an application being company application No 844 of 1981 for an interim injunction and on this application an ex parte order was made by the learned Company 936 Judge restraining the Company which was respondent No 6 in the winding up petition as also Respondent nos
7 to 14 from borrowing any monies from banks financial institutions or others without the prior permission of the Court and from alienating andor creating any charge or encumbrance over any of the assets of the Company in its various enterprises
The immediate consequence of this ex parte order of injunction was that the Jotie Mills Employees Co operative Store stopped issuing any provisions or supplies to the workmen from 18th July 1981 and the workmen were also unable from 23rd July 1981 to enjoy the benefits under the Employees State Insurance Scheme
The workmen also apprehended that on account of the ex parte order of injunction they may not be able to get their wages which were due to be paid on 7th August 1981
Now some of the workmen were members of the National Textile Workers Union some others were members of the Coimbatore District National Textile Employees Union while still some others were members of the Coimbatore District Engineering Workers Union
The Coimbatore District National Textile Employees Union with a view to protecting the interests of its members made an application being company application No 88081 on 28th July 1981 for impleading itself as a respondent
The Coimbatore District Engineering Workers Union also made a similar application to the Company Judge on the same day being Company Application No 881 of 1981
So also the National Textile Workers Union made an application being company application No 883 of 1981 to the Company Judge on 29th July 1981 praying that it may be permitted to intervene in the winding up petition and that the ex parte order of injunction may be vacated
Respondent nos
1 to 5 filed their affidavit in reply to these three applications and the principal contention raised by them was that the National Textile Workers Union the Coimbatore District National Textile Employees Union and the Coimbatore District Engineering Workers Union had no locus standi to appear and oppose the winding up petition since the workmen who were members of these three unions were neither creditors nor contributories of the company
These three applications came up for hearing before the Company Judge and after hearing full arguments on both sides the Company Judge made an order dated 14th September 1981 rejecting all the three applications on the ground that under the  the workmen had no right either to get impleaded in the winding up petition or even to intervene in the winding up petition
The Company Judge 937 followed the decision of a single Judge of the Bombay High Court in In re Edward Textiles Limited1 in taking this view
The Company Judge conceded and this concession had to be made because of the observations of this Court in Fertilizer Corporation Kamgar Union and Ors
vs Union of India and Ors2 and of the High Court of Bombay in Bhalchandra Dharamaji Makaji vs Alcock Ashdown and Co Ltd3 that the factors to be taken into account by the court while disposing of a winding up petition would include the interest of the workmen of the company but observed that the duty of the court to consider the interest of the worker of the company would not create a right in such workers to intervene in the absence of express provision in the and in the teeth of such right specifically conferred only on the creditors and contributories
 The National Textile Workers Union thereupon preferred an appeal before a Division Bench of the High Court but the Division Bench also took the same view and held that though it was undoubtedly true that while disposing of a winding up petition preferred on the ground that it is just and equitable to wind up the company the court must consider the interest of the workmen it does not mean that everybody who is remotely interested in the company can file an application to implead himself as a party in the petition for winding up and merely because in considering the question whether to wind up or not the court has also to take the larger point of public interest including that of the workers into consideration it will not clothe the Unions with any locus standi to file applications for impleading themselves as parties or to be heard in the company petition
 The Division Bench accordingly rejected the appeal and this led to the filing of Special Leave Petition No 9661 of 1981 in this Court by the National Textile Workers Union
The Coimbatore District National Textile Employees Union and the Coimbatore District Engineering Workers Union did not prefer any appeal against the judgment of the Company Judge before the Division Bench of the High Court but they preferred Special Leave Petitions Nos 10248 and 10249 of 1981 directly in this Court against the judgment of the Company Judge
We issued notice on all the three Special Leave Petitions and when the Respondents appeared before us we intimated to them that we will dispose of the entire controversy between the parties on the Special Leave Petitions and that is how full and detailed arguments 938 were advanced before us at the hearing of the Special Leave Petitions
We now proceed to dispose of these cases after granting special leave to appeal in each of the three special leave petitions
Before we proceed to discuss the basic and vital question that arises for consideration in these appeals it is necessary to set out a few further facts which may have some bearing on the final relief to be granted by us
On the same day on which respondent Nos 1 to 5 filed the winding up petition and applied for interim injunction they also made an application being Company Application No 843 of 1981 praying for appointment of Provisional Liquidator of the company
Respondent Nos 6 to 14 appeared at the time when this application was presented and asked for time to file their affidavit in reply and time was granted by the Company Judge upto 10th August 1981
Respondent Nos
6 to 14 thereafter filed an affidavit in reply on 10th August 1981 and after hearing both sides in a bitterly contested argument the Company Judge made an order on 7th December 1981 appointing the official liquidator as Provisional Liquidator of the Company
The workmen represented by the National Textile Workers  Union the Coimbatore District National Textiles Employees  Union and the Coimbatore District Engineering Workers  Union did not have an opportunity of being heard before the order appointing Provisional Liquidator was passed by the Company Judge because as pointed out above their applications for impleading themselves as parties in the winding up petition or in any event for being allowed to intervene in the winding up petitions were rejected by the Company Judge on 14th September 1981 and this rejection was confirmed by the Division Bench of the High Court on 30th September 1981
The result was that the order appointing Provisional Liquidator of the company came to be made by the Company Judge without any opportunity being given to the workmen represented by these three Unions to appear and show cause against the making of such order
It may be pointed out that the order appointing Provisional Liquidator was stayed for some time by the Division Bench of the High Court in an appeal preferred by respondent Nos
6 to 14 but the application for stay was ultimately dismissed by the Division Bench and the Official Liquidator immediately thereafter took charge of the affairs of the company
We may now proceed to consider the question that arises for determination before us
The question briefly stated is when a 939 petition for winding up a company is filed in court are the workmen of the company entitled to ask the court to implead them as parties in the winding up petition or to allow them to appear and contest the winding up petition or they have no locus standi at all so far as winding up petition is concerned and they must helplessly watch the proceedings as outsiders though the result of the winding up petition may be to bring about termination of their services and thus affect them vitally by depriving them of their means of livelihood  It is a well established principle of administrative law that no order entailing adverse civil consequences can be made by the State or a public authority unless the person affected is afforded an opportunity to show cause against the making of such order by controverting the allegations made against him and presenting his own positive case but in case of a winding up petition it was contended on behalf of respondents Nos 2 to 5 that though the result of successful termination of a winding up petition may and in most cases would be to put an end to the services of the workmen and throw them on the streets they are not entitled to an opportunity to be heard against the making of the winding up order because under the  it is only the creditors and contributories and in certain specified contingencies the Registrar and the Central Government who can present a petition for winding up a company and the workmen have no locus at all in a winding up petition except where their dues have remained unpaid in which case they would be entitled to be heard in a winding up petition but that would be in their capacity as creditors and not as workmen
It was also urged on behalf of respondent Nos 1 to 5 that in any event even if workmen have a right to intervene in a winding up petition in the present case it was not the workmen who had applied for being heard in the winding up petition but the applications were made by the three unions and since a Union of workmen has no right to be heard the applications of the three unions were rightly rejected
This last contention of respondent Nos 1 to 5 is obviously untenable and it need not detain us
It is incontrovertible and this indeed could not be disputed on behalf of respondent Nos 1 to 5 that the applications were made by the Unions on behalf of the workmen represented by them and though made in the name of the unions the applications were in reality and substance applications of the workmen who were members of each respective union
The controversy therefore really is not whether the unions of workmen are entitled to be heard in a winding up petition but whether the workmen have such right when a winding up petition is filed against 940 a company
We may straight away point out that though the applications made by the Coimbatore District National Textile Employees and Coimbatore District Engineering Workers Union were for impleading them as parties in the winding up petition it was conceded on behalf of these two unions that they were not pressing their applications for being added as parties because there was no procedure known to for any one to be impleaded as a party in a winding up petition and even the creditors and contributories were not entitled to be added as parties and they were claiming only the right to appear and be heard in support or opposition to the winding up petition
The contention of these two unions was therefore a limited one and that was also the narrow contention advanced on behalf of National Textile Workers  Union namely that the workmen represented by them were entitled to intervene in the winding up petition and to be heard before any order was made by the Company Judge in the winding up petition because any such order might affect the interest of the workmen
It was pointed out on behalf of the three unions that even if an interim order were to be made by the Company Judge which might prejudicially affect the workmen by freezing the resources of the company so as to make it difficult for the company to pay the wages of the workmen or bringing about stoppage of the business of the company resulting in non payment or diminution of their wages or termination of their services the workmen must surely be afforded an opportunity to be heard before any such interim order is made
It would be contrary to every recognised principle of fair judicial procedure and violative of the rule of audi alteram partem which constitutes one of the basic principles of natural justice to deny to the workmen the right to be heard before an order is made by the Company Judge prejudicially affecting their interest
Additionally reliance was also placed on behalf of the three unions on Rule 34 of the Companies Court Rules 1959 which provides as follows Rule 34
Notice to be given by persons intending to appear at the hearing of petition Every person who intends to appear at the hearing of a petition whether to support or oppose the petition shall serve on the petitioner or his advocate notice of his intention at the address given in the advertisement
The notice shall contain the address of such person and be signed by him 941 or his advocate and save as otherwise provided by these rules shall be served or if sent by post shall be posted in such time as to reach the addressee not later than two days previous to the day of hearing and in the case of a petition for winding up not later than five days previous to the day of hearing
Such notice shall be in Form No 9 with such variations as the circumstances may require and where such person intends to oppose the petition the grounds of his opposition or a copy of his affidavit if any shall be furnished along with the notice
Any person who has failed to comply with this rule shall not except with the leave of the Judge be allowed to appear at the hearing of the petition
 The argument urged on behalf of the three unions was that this rule confers a right on the workmen to appear at the hearing of the winding up petition either to support it or to oppose it and clearly recognises that they are entitled to intervene and be heard in the winding up petition
Respondent Nos
1 to 5 however seriously challenged the locus of the workmen to appear and be heard in the winding up petition and contended that so far as the winding up petition is concerned it is only the creditors and contributories and in certain specified contingencies the Registrar and the Central Government who are entitled to appear at the hearing of the winding up petition whether to support or to oppose it
The right to be heard in the winding up petition contended respondent Nos 1 to 5 is governed solely by the provisions of the and since no such right is conferred on the workmen by any provision of the  the workmen are not entitled to intervene in the winding up petition even though the making of a winding up order may result in termination of their services
The workmen according to respondent Nos 1 to 5 could appear at the hearing of the winding up petition and make their submissions only in their capacity as creditors if any part of their wages remained unpaid by the company but they had no locus to appear in their capacity as workers
These rival contentions urged on behalf of the parties raised an interesting question of law which we shall now proceed to consider
942 There is one very important consideration which we must bear in mind while dealing with this question and it is necessary to advert to it at the present stage
The concept of a company has undergone radical transformation in the last few decades
The traditional view of a company was that it was a convenient mechanical device for carrying on trade and industry a mere legal frame work providing a convenient institutional container for holding and using the powers of company management
The company law was at that time conceived merely as a statute intended to regulate the structure and mode of operation of a special type of economic institution called company
This was the view which prevailed for a long time in juristic circles all over the democratic world including United States of America United Kingdom and India
That was the time when the doctrine of laissez faire held sway and it dominated the political and economic scene
This doctrine glorified the concept of a free economic society in which State intervention in social and economic matters was kept at the lowest possible level
But gradually this doctrine was eroded by the emergence of new social values which recognised the role of the State as an active participant in the social and economic life of the citizen in order to being about general welfare and common good of the community
With this change in socio economic thinking the developing role of companies in modern economy and their increasing impact on individuals and groups through the ramifications of their activities began to be increasingly recognised
It began to be realised that the company is a species of social organisation with a life and dynamics of its own and exercising a significant power in contemporary society
The new concept of corporate responsibility transcending the limited traditional views about the relationship between management and shareholders and embracing within its scope much wider groups affected by the trading activities and other connected operations of companies emerged as an important feature of contemporary thought on the role of the corporation in modern society
The adoption of the socialistic pattern of society as the ultimate goal of the country s economic and social policies hastened the emergence of this new concept of the corporation
The socio economic objectives set out in of the Constitution have since guided and shaped this new corporate philosophy
We shall presently refer to some of the Directive Principles of State Policy set out in Part IV which clearly show the direction in which the corporate sector is intended to move and the role which it is intended to play in the social and economic life of the nation
But one thing is certain 943 that the old nineteenth century view which regarded a company merely as a legal device adopted by shareholders for carrying on trade or business as proprietors has been discarded and a company is now looked upon as a socio economic institution wielding economic power and influencing the life of the people
It is now accepted on all hands even in predominantly capitalist countries that a company is not property
The traditional view that the company is the property of the shareholders is now an exploded myth
There was a time when a group controlling the majority of shares in a company used to say This is our concern
We can do what we like with it
 The ownership of the concern was identified with those who brought in capital
That was the outcome of the property minded capitalistic society in which the concept of company originated
But this view can no longer be regarded as valid in the light of the changing socio economic concepts and values
Today social scientists and thinkers regard a company as a living vital and dynamic social organism with firm and deep rooted affiliations with the rest of the community in which it functions
It would be wrong to look upon it as something belonging to the shareholders
It is true that the shareholders bring capital but capital is not enough
It is only one of the factors which contributes to the production of national wealth
There is another equally if not more important factor of production and that is labour
Then there are the financial institutions and depositors who provide the additional finance required for production and lastly there are the consumers and the rest of the members of the community who are vitally interested in the product manufactured in the concern
Then how can it be said that capital which is only one of the factors of production should be regarded as owner having an exclusive dominion over the concern as if the concern belongs to it A company according to the new socio enconomic thinking is a social institution having duties and responsibilities towards the community in which it functions
The Supreme Court pointed out as far back as 1950 in Chiranjeetlal vs Union of India We should bear in mind that a corporation which is engaged in production of commodities vitally essential to the community has a social character of its own and it must not be regarded as the concern primarily or only of those who invest their money in it 944 Pt
Govind Ballabh Pant also pointed out in one of his speeches  industry is not an isolated concern of the shareholders or the managing agents alone
It reacts on the entire people in the country on their economic conditions on employment or standard of living on everything that conduces to the material well being
 The same view was also expressed at the International Seminar on Current Problems of Corporate Law Management and Practice held in New Delhi where it was observed that an enterprise is a citizen
Like a citizen it is esteemed and judged by its actions in relation to the community of which it is a member as well as by its economic performance
 That is why it is regarded as one of the paramount objectives of a company to bring about maximisation of social welfare and common good
This necessarily involves reorientation of thinking in regard to the duties and obligations of a company not only vis a vis the shareholders but also vis a vis the rest of the community affected by its operations such as workers consumers and the Government representing the society
There was at one time a serious controversy between two schools of thought one represented by Adolf Berle and the other by Professor Dodd as regards the nature of duties and obligations owed by directors representing management of a company
Adolf Berle took the view that directors are trustees only for shareholders that is the traditional view which directly flows from a purely capitalistic approach which identifies ownership and dominion with capital while Prof Dodd believed that directors are trustees not only for shareholders but also for the entire community
Ultimately however in his subsequent book Twentieth Century Capitalist Revolution Adolf Berle conceded that Prof Dodd was right and that modern directors are not limited to running business enterprise for maximum profit motive alone but are in fact administrators of community system or of a social institution
That is why we find that in recent times there is considerable thinking on the subject of social responsibilities of corporate management and it is now acknowledged even in highly developed countries like the United States and England that maximisation of social welfare should be the legitimate goal of a company and shareholders should be regarded not as proprietors of the company but merely as suppliers of capital entitled to no more than reasonable return and the company should be responsible not only to shareholders but also to workers consumers and the other 945 members of the Community and should be guided by considerations of national economy and progress
This new concept of a Company was felicitously expressed by Desai J sitting as a Judge of the Gujarat High Court in Panchmahal Steel Ltd vs Universal Steel Traders1 in the following words Time honoured approach that the company law must safeguard the interest of investors and shareholders of the company would be too rigid a framework in which it can now operate
New problems call for a fresh approach
And in ascertaining and devising this fresh approach the objective for which the company is formed may provide a guide line for the direction to be taken
As Prof De Wool of Belgium puts it the company has a three fold reality economic human and public each with its own internal logic
The reality of the company is much broader than that of an association of capital it is a human working community that performs a collective action for the common good
In recent years a debate is going on in the world at large on the functions and foundations of corporate enterprise
The preservationists and the reformers are vigorously propounding their views on the possible reform of company the modern trend emphasising the public interest in corporate enterprise
 The learned judge elaborated this modern trend by quoting from Prof Gower s book on The Principles of Modern Company Law One section of the community whose interests as such are not afforded any protection either under this head or by virtue of the provisions for investor or creditor protection are the workers and employees of the taken over company
This is a particularly unfortunate facet of the principle that the interest of the company means only the interest of the members and not of those whose livelihood is in practice much more closely involved
 We are concerned in these appeals only with the relationship of the workers vis a vis the company
It is clear from what we have stated above that it is not only the shareholders who have supplied capital who are interested in the enterprise which is being run by a company but the workers who supply labour are also equally 946 interested because what is produced by the enterprise is the result of labour as well as capital
In fact the owners of capital bear only limited financial risk and otherwise contribute nothing to production while labour contributes a major share of the product While the former invest only a part of their moneys the latter invest their sweat and toil in fact their life itself
The workers therefore have a special place in a socialist pattern of society
They are no more vendors of toil they are not a marketable commodity to be purchased by the owners of capital
They are producers of wealth as much as capital
They supply labour without which capital would be impotent and they are at the least equal partners with capital in the enterprise
Our constitution has shown profound concern for the workers and given them a pride of place in the new socio economic order envisaged in the Preamble and the Directive Principles of State Policy
The Preamble contains the profound declaration pregnant with meaning and hope for millions of peasants and workers that India shall be a socialist democratic republic where social and economic justice will inform all institutions of national life and there will be equality of status and opportunity for all and every endeavour shall be made to promote fraternity ensuring the dignity of the individual
Every one is assured under Article 14 equality before the law and equal protection of the laws and implicit in this provision is the guarantee of equal remuneration for men and women for some work or work of a similar nature
Traffic in human beings and begar and other similar forms of forced labour are prohibited under Article 23 and Article 24 mandates that no child below the age of 14 may be employed in any factory or mine or engaged in any other hazardous employment
These two Articles recently came up for construction before this Court in People s Union for Democratic Rights  Orsv
Union of India  Ors1 Article 38 imposes obligation on the State albeit unenforceable in a court of law to strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which social justice shall inform all the institutions of the national life
This is followed by Article 39 which inter alia obliges the State to direct its policy towards securing that the citizens men and women equally have the right to an adequate means of livelihood the ownership and control of the material resources of the community are so distributed as best to subserve the common good the operation of the economic system 947 does not result in the concentration of wealth and means of production to the common detriment there is equal pay for equal work for both men and women and the health and strength of workers men and women and the tender age of children are not abused and citizens are not forced by economic necessity to enter avocations unsuited to their age or strength
The State is directed by Article 41 to make effective provision within the limits of its economic capacity and development for securing the right to work and Article 42 requires the State to make provision for securing just and humane conditions of work and for maternity relief
Article 43 provides that the State shall endeavour to secure by suitable legislation or economic organisation or in any other way a living wage conditions of work ensuring decent standard of life and full enjoyment of leisure and social and cultural opportunities
Then follows Article 43A which is intended to herald industrial democracy and in the words of Krishna Iyer J mark the end of industrial bonded labour
That Article says that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings establishments or other organisations engaged in any industry
The constitutional mandate is therefore clear and undoubted that the management of the enterprise should not be left entirely in the hands of the suppliers of capital but the workers should also be entitled to participate in it because in a socialist pattern of society the enterprise which is a centre of economic power should be controlled not only by capital but also by labour
It is therefore idle to contend thirty two years after coming into force of the Constitution and particularly after the introduction of Article 43A in the Constitution that the workers should have no voice in the determination of the question whether the enterprise should continue to run or be shut down under an order of the court
It would indeed be strange that the workers who have contributed to the building of the enterprise as a centre of economic power should have no right to be heard when it is sought to demolish that centre of economic power
The principal argument urged against the right of the workers to be heard in the winding up petition was that under the scheme of the  it is only the creditors and contributories who are entitled to appear and be heard in a winding up petition
The is a self contained code exhaustive in regard to all matters relating to companies and since there is no provision in that Act conferring on the workers a right to intervene 948 in a winding up petition no such right can be spelt out in their favour outside the provisions of that Act Respondent Nos 6 to 9 relied upon various provisions of the in support of their contention that the workers have no locus in a winding up petition but we do not think these provisions lend any support to that contention
The first provision relied upon by Respondent Nos 6 to 9 was section 439 which inter alia provides as to who shall be entitled to make an application for winding up of a company
It is no doubt true that this section confers the right to present a winding up petition only on certain specifically enumerated persons and the workers are not included in that enumeration and therefore obviously the workers have no right to prefer a petition for winding up of a company
The right to apply for winding up of a company being a creature of statute none other than those on whom the right to present a winding up petition is conferred by the statute can make an application for winding up a company and no such right having been conferred on the workers they cannot prefer a winding up petition against a company
But from this exclusion of the workers from the right to present a winding up petition it does not follow as a necessary consequence that the workers have no right to appear and be heard in a winding up petition filed by one or more of the persons specified in section 439
It may be that the workers have no right to present a winding up petition against the company but if a winding up petition is properly filed by any of the persons entitled to do so under section 439 they may still be entitled to appear and be heard in support or opposition to the winding up petition
That would depend upon whether their interest is likely to be affected by any order which may be made on the winding up petition
The next section relied upon by respondent Nos 6 to 9 was section 440 which says that where a company is being wound up voluntarily or subject to the supervision of the court a petition for its winding up by court may be presented by any person authorised to do so under section 439 or the official Liquidator but the court shall not make a winding up order unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the court cannot be continued with due regard to the interests of the creditors or contributories or both
It was urged on behalf of respondent Nos 6 to 9 that this section shows that the winding up of a company is intended to be for the benefit of the creditors and the contributories and the interest of the workers has no place at all in the winding up and is not required to be taken into account in winding up the company
This argument 949 is also in our opinion futile because what this section deals with is the stage after the winding up has commenced whether voluntary or subject to the supervision of the court while we are concerned with a stage anterior to the making of a winding up order
There can be little doubt that the object of winding up being to realise the assets of the company pay the preferential claims and expenses of liquidation and then discharge the debts of the creditors in full or pari passu and if after paying to the creditors there is any surplus distribute the same among the shareholders by way of dividend and ultimately dissolve the company it is only the creditors and the contributories who would be affected by any action taken in the course of winding up of the company and that is why we find several provisions in the which speak of winding up being carried on with due regard to the interest of the creditors and the contributories or after consultation with them or confer rights on the creditors and the contributories to make applications for diverse purposes with a view to effective winding up of the company
Such provisions are for instance to be found in section 464 466 478 517 542 543 549 556 557 and 560
These provisions apply at a stage after a winding up order is made by the court or the voluntary winding up has commenced or an order is made for continuance of winding up subject to the supervision of the court when winding up having been ordered or resolved what remains to be done is only to wind up the company pay the creditors and if there is any surplus distribute the same among the shareholders
These provisions do not deal with a situation prior to the making of the winding up order when the question is whether the company should be ordered to be wound up or not
While the company is continuing to subsist the workers would be employed in the enterprise which is being run by the company and they would be earning their livelihood from such employment but if an order for winding up is made their services would except in cases where the business of the company is continued stand terminated by reason of sub section 3 of section 445 which provides that a winding up order shall be deemed to be notice of discharge to the officers and employees of the company except when the business of the company is continued
 Ordinarily when a winding up order is made the business of the company would cease to continue and even if the Liquidator is authorised to carry on the business such continuance would be only for the beneficial winding up of the company and the logical and inevitable end would be the ultimate discontinuance of the business
The making of a winding up order 950 on a petition for winding up would therefore almost certainly have an adverse consequence on the workers in as much as the continuance of their service would be seriously jeopardised and their right to work and earn their livelihood would be disastrously imperilled
Now it is an elementary principle of law well settled as a result of several decisions of this Court and particularly the decisions in State of Orissa vs Dr Bini Pani1 AK Kraipa vs Union of India2 and Maneka Gandhi vs Union of India3 that no order involving adverse civil consequences can be passed against any person without giving him an opportunity to be heard against the passing of such order and this rule applies irrespective of whether the proceeding in which it is passed is a quasi judicial or an administrative proceeding
The audi alterum partem rule which mandates that no one shall be condemned unheard is one of the basic principles of natural justice and if this rule has been held to be applicable in a quasi judicial or even in an administrative proceeding involving adverse civil consequences it would a fortiori apply in a judicial proceeding such as a petition for winding up of a company
It is difficult to imagine how any system of law which is designed to promote justice through fairplay in action can permit the court to make a winding up order which has the effect of bringing about termination of the services of the workers without giving them an opportunity of being heard against the making of such order
It would be violative of the basic principle of fair procedure and unless there is express provision in the which forbids the workers from appearing at the hearing of the winding up petition and participating in it the workers must be held entitled to appear and be heard in the winding up petition
That is the minimum requirement of the principle of audi alterum partem which cannot be ignored save on pain of invalidation of the order of winding up
Here we do not find any provision in the which in so many terms excludes the workers from appearing at the hearing of the winding up petition with a view to supporting or opposing it and the only ground on which the right of the workers to appear and be heard in the winding up petition is disputed is that there is no specific provision in the Act entitling them to do so and the right to apply for winding up as also to participate in the proceedings in the course of winding up is conferred only on the creditors and the 951 contributories
But we have pointed out above that merely because the right to apply for winding up a company is not given to the workers it does not mean that they cannot appear to support or oppose a winding up petition which is properly filed by one or the other persons specified in section 439
There would in fact be no point in conferring the right to apply for winding up of a company on the workers since they cannot have any interest in demolishing the enterprise which is the source of their livelihood and particularly when the only effect of the winding up order would be to render them unemployed and to bring about winding up of the company for the benefit of the creditors and the contributories
So also the circumstance that the right to be consulted or to make applications in the course of the winding up of a company is conferred only on the creditors and the contributories does not in any way militate against the right of the workers to appear and be heard in the winding up petition because once the winding up order is made the assets of the company have to be realised the creditors have to be paid and if there is any surplus it has to be distributed among the contributories and therefore at that stage it is only the creditors and the contributories who have an interest and that is why in the course of the winding up it is the creditors and the contributories who have been given a voice
That has nothing to do with the question whether the company should be wound up or not which is a question in which the workers are vitally concerned and on which they must obviously be heard before any decision is taken by the court
This view which we are taking is in accord with the decision of the High Court of Bombay namely Bhalchandra Dharmajee Makaji and Ors
vs Alcock Ashdown  Co Ltd  Ors
where the Company Judge while disposing of an application for appointment of Official Liquidator as Provisional Liquidator pending the hearing and final disposal of the main petition for winding up said After the amendment of sections 397 and 398 of the by sections 10 and 11 of the Companies Amendment Act LIII of 1963 it would appear that the affairs of the company have to be conducted not only in the best interest of its members for their profit but also in a manner which is not prejudicial to public interest
The element of public interest enters into the management of the companies after 1963
The modern corporation has 952 become the accepted instrument of social policy because it affects a large part of the economic life of the community
It has become an instrument for the improvement of the economic standards of the people and for economic growth of the nation
Society depends for some of its needs on corporate enterprise
It has therefore an interest in its stability and efficiency as an economic institution
The element of public interest also arises from the responsibility for ensuring a minimum wage to the numerous employees in the corporate sector
It is necessary to see that people who put their labour and lives into a concern get fair wages continuity of employment and a recognition of their jobs where they have trained themselves to highly skilled and specialised work
In deciding whether the court should wind up a company or change its management the court must take into consideration not only the interest of the shareholders and creditors but also public interest in the shape of the need of the community and the interest of the employees
This in my opinion is the requirement of sections 397 and 398 of the 
 If in deciding whether the court should wind up a company or change its management the court must take into consideration not only the interest of the shareholders and creditors but also amongst other things the interest of the workers it is axiomatic that the workers must have an opportunity of being heard for projecting and safeguarding their interest before a winding up order is made by the court
The Division Bench of the Madras High Court has of course conceded in the judgment under appeal that in considering the question whether to wind up or not the court has to take the larger point of public interest including that of the workers into consideration but that in the opinion of the Division Bench would not clothe the workers with any locus standi to file an application for being heard in the winding up petition
With the greatest respect to the learned Judges constituting the Division Bench we must express our emphatic disapproval of this approach
It amounts to the court telling the workers No doubt in deciding whether the company should be wound up or not we are bound to take into consideration your interest but you need not be heard because we know best what your interest requires This paternalistic attitude towards the workers that though they are most vitally concerned and their interest is required to be taken into consideration they need not be heard because the court in its wisdom knows 953 presumably more than the workers themselves what is in their interest and they should leave their fate into the hands of the court without even a whisper of an argument sounds like a relic of a by gone age and must be abandoned
If the interest of the workers has to be taken into account the workers must have a say because they know best where their interest lies and they must have an opportunity of placing before the court relevant material bearing upon their interest
Considerable reliance was however placed on behalf of respondent Nos
6 to 9 on the statement of the law on this point contained in the leading text books on company law
Respondent Nos 6 to 9 drew our attention to Palmer Company Precedents 17th Edn volume 2 at page 77 where it is stated that any creditor or shareholder may appear to support or oppose the petition but no one else can do so even if he has an indirect interest in the continued existence of the company
So also in Buckley on the 14th Edn at page 546 the law has been stated in the following terms namely the only persons entitled to be heard are the company its creditors and contributories  the court may in its discretion hear other persons who have an interest in order to learn what public grounds there are in favour of or in opposition to the winding up but such persons can be heard only as amici curiae and cannot appeal
 Our attention was also invited to Halsbury s Laws of England 4th Ed
Vol 7 where a similar statement of the law is to be found at page 614 paragraph 1028
Now it is undoubtedly true that according to the statement of the law contained in these three leading text books it is only the company the creditors and the contributories who are entitled to appear on the winding up petition and no other persons have a right to be heard but this statement of the law is based on the old decision in Re
Bradford Navigation Company which was carried in appeal and decided as Re
Bradford Navigation Company
This decision given by the English Courts over a hundred years ago when a company was regarded merely as a legal device brought into being as a result of a contractual arrangement between the shareholders for the purpose of carrying on trade or business and the workers were looked upon as no more than employees of the company working under a master and servant relationship and the interest of the public as consumers or otherwise was a totally irrelevant consideration and it can have no validity in the present times when the entire concept of a company has changed and it has been transformed into a dynamic 954 socio economic institution in which capital and labour are both equal partners possibly with heavy weightage in favour of labour and the interest of the public as consumers as also the general welfare and common good of the community constitute a vital consideration
We cannot allow the dead hand of the past to stifle the growth of the living present
Law cannot stand still it must change with the changing social concepts and values
If the bark that protects the tree fails to grow and expand alongwith the tree it will either choke the tree or if it is a living tree it will shed that bark and grow a new living bark for itself
Similarly if the law fails to respond to the needs of changing society then either it will stifle the growth of the society and choke its progress or if the society is vigorous enough it will cast away the law which stands in the way of its growth
Law must therefore constantly be on the move adopting itself to the fast changing society and not lag behind
It must shake off the inhibiting legacy of its colonial past and assume a dynamic role in the process of social transformation
We cannot therefore mechanically accept as valid a legal rule which found favour with the English courts in the last century when the doctrine of laissez faire prevailed
It may be that even today in England the courts may be following the same legal rule which was laid down almost a hundred years ago but that can be no reason why we in India should continue to do likewise
It is possible that this legal rule might still be finding a place in the English text books because no case like the present one has arisen in England in the last 30 years and the English courts might not have had any occasion to consider the acceptability of this legal rule in the present times
But whatever be the reason why this legal rule continues to remain in the English text books we cannot be persuaded to adopt it in our country merely on the ground that it has been accepted as a valid rule in England
We have to build our own jurisprudence and though we may receive light from whatever source it comes we cannot surrender our judgment and accept as valid in our country whatever has been decided in England
The rule enunciated in re Bradford Navigation Company case supra does not commend itself to us and though it has been followed by a single Judge of the Bombay High Court in re Edward Textiles Limited supra we do not think it represents correct law
We may also mention that on behalf of the appellants some reliance was placed on Rule 34 of the Companies Court Rules 1959 in support of their contention that not only the creditors and the contributories but also other persons are entitled to appear at the 955 hearing of a winding up petition and the workers cannot therefore be excluded
This Rule provides that every person who intends to appear at the hearing of a winding up petition whether to support or to oppose it shall serve on the petitioner or his advocate notice of his intention at the address given in the advertisement and such notice shall be in form No 9 and where such person intends to oppose the winding up petition the grounds of his opposition or a copy of his affidavit if any shall be furnished along with the notice
The appellants contended that under this Rule any one who wants to appear in a winding up petition can do so provided he serves on the petitioner or his advocate notice of his intention at the address given in the advertisement and complies with the other requirements of this Rule and therefore if the workers desire to appear at the hearing of the winding up petition they are entitled to do so
The answer given on behalf of respondent Nos 6 to 9 to this contention was that Rule 34 is applicable only after a winding up petition is admitted and an order is made for advertisement of the winding up petition and it has no application at the stage when the winding up petition is before the court only for the purpose of deciding whether or not it should be admitted and advertised
It was also urged on behalf of respondent Nos 6 to 9 that in any event Rule 34 does not confer a right on any and every person to appear at the hearing of the winding up petition intends so to appear he must take various steps set out in that Rule beginning with service of notice on the petitioner or his advocate before he can be heard on the winding up petition
We are inclined to agree with this contention of respondent Nos
6 to 9
It is obvious that the object and purpose of Rule 34 is not to confer a right on any one to appear at the hearing of the winding up petition but merely to provide the procedure to be followed before a person who is otherwise entitled to appear in a winding up petition can be heard in support or opposition of the winding up petition
This rule cannot therefore be relied upon by the appellants as conferring a right on the workers to appear at the hearing of a winding up petition
But one thing is clear that this Rule does postulate that apart from the creditors and contributories there may be other persons who are entitled to appear at the hearing of the winding up petition because it is not confined in its application to the creditors and contributories but uses the generic impression every person and to this limited extent it does undoubtedly lend some support to the contention of the appellants
956 We are therefore of the view that the workers are entitled to appear at the hearing of the winding up petition whether to support or to oppose it so long as no winding up order is made by the court
The workers have a locus to appear and be heard in the winding up petition both before the winding up petition is admitted and an order for advertisement is made as also after the admission and advertisement of the winding up petition until an order is made for winding up the company
If a winding up order is made and the workers are aggrieved by it they would also be entitled to prefer an appeal and contend in the appeal that no winding up order should have been made by the Company Judge
But when a winding up order is made and it has become final the workers ordinarily would not have any right to participate in any proceeding in the course of winding up the company though there may be rare cases where in a proceeding in the course of winding up the interest of the workers may be involved and in such a case it may be possible to contend that the workers must be heard before an order is made by the court
We think that even when an application for appointment of a provisional liquidator is made by the petitioner in a winding up petition the workers would have a right to be heard if they so wish because the appointment of a provisional liquidator may adversely affect the interest of the workers
But we may make it clear that neither the petitioner nor the court would be under any obligation to give notice of such application to the workers
It would be for the workers to apply for being heard and if they do so they would be entitled to appear and be heard on the application for appointment of provisional liquidator
The workers therefore in the present case had a right to be heard before the provisional liquidator was appointed by the Company Judge but the circumstance that the workers were not so heard would not have the effect of vitiating the order appointing provisional liquidator because on the view taken by us it would be open to the workers to apply to the court for vacating that order and it would be for the court after considering the material produced before it and hearing the parties to decide whether that order should be vacated or not
We accordingly allow the appeals set aside the order dated 14th September 1981 made by a Single Judge of the High Court and confirmed by the Division Bench on 13th September 1981 and direct that the three Unions shall be entitled to appear and be heard in the winding up petition
There will be no order as to costs of these appeals
957 CHINNAPPA REDDY J
I agree with my brother Bhagwati
I wish to add a few words not because I have much more to say nor ever hope to say what he has said more felicitously but because my brother Venkataramiah has disagreed and my regard for him compels me to add a few words of explanation  you take my life when you do take the means whereby I live Shakespeare The Merchant Venice
This indeed is the cry of the workers of Ramakrishna Industries P Ltd who desire to be heard before the bread is taken out of their mouths
A battle royal appears to be raging between two rival groups of shareholders of the company
A petition for winding up the company has been presented by one group of shareholders
And an application for the appointment of a provisional liquidator too
Quite apart from Sec
445 3 of the which provides that the order for winding up shall be deemed to be notice of discharge of the officers and employees of the company except when the business of the company is continued it is plain that the future of the workers is at stake and their right to work is in jeopardy as a result of the presentation of the winding up petition
Unlike the shareholders to most of whom the shares they hold represent mere investments and to some of whom the means to control the affairs of the company to the workers the life of the company is their own and its welfare is theirs
They are so intimately tied up that their interest in the survival and the well being of the company is much more than the interest of any shareholder be he an investor a corporate commander  or a corporate manipulator
How then is it possible that these persons the workers whose very existence may be under threat of extinction are to be denied a hearing even if sought when a petition for winding up is presented to a court
It is said that the does not contemplate a hearing to the workers
Only contributories and creditors may be heard it seems
Workers may not be allowed to throng the company court only those who buy sell and control shares and the usurers the stockbrokers and the money brokers
Those who invest money may be heard those who invest their lives may not be heard
No The does not prohibit a hearing to the workers
The does not say who may be heard
The does not provide for all situations
The Company Judge must decide some matters
He must use his imagination
He must use his discretion
But without transgressing any legal norms Company Law is not a field in which 958 finality is to be expected 
The law falls to be applied to a growing and changing subject matter 
This is recognised in the report of the Jenkins Committee in the United Kingdom and in this country in the Statement of Objects and Reasons to the Companies Amendment Act of 1974
So when new situations arise as indeed they are bound to arise having regard to the complexities of growth and change the Company Judge cannot retreat into the Corporate shell but must expand and expound
He must take the bull by the horns
as it were
He must recognise and expose the reality of the workers  interest and the dubiety of the interest of the others
He must acknowledge the transformation which corporations are presently undergoing from capitalist contrivances into socialist instruments
No doubt it was the creative genius of the bourgeoisie that invented the corporations and the companies invested them with a corporate soul and a juristic personality and called them legal entities in order to meet the growing and complex demands of modern industry and management to conduct business and commercial activities more conveniently and efficiently and essentially to foster consolidate and stabilise the capitalist system of society under whose aegis alone the exploiting class could thrive and continue to exploit the working class
Corporations became the symbol of competitive capitalism
But the historical processes continue at work
The movement is now towards socialism
The working classes all the world over are demanding workers  control  and Industrial Democracy 
They want security and the right to work to be secured
They want the control and direction of their lives in their own hands and not in the hands of the industrialists bankers and brokers
Our constitution has accepted the workers  entitlement to control and it is one of the Directive Principles of State Policy that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings establishments or other organisations engaged in any industry
It is in this context of changing norms and waxing values that one has to judge the workers  demand to be heard
And what do the workers want They want to be heard lest their situation be altered unheard
They invoke natural justice so to claim justice
They invoke the same rule which the courts compel administrative tribunals to observe
Can courts say natural justice need not be observed by them as they know how to render justice without observing natural justice It will surely be a travesty of 959 justice to deny natural justice on the ground that courts know better
There is a peculiar and surprising misconception of natural justice in some quarters that it is exclusively a principle of administrative law
It is not
It is first a universal principle and therefore a rule of administrative law
It is that part of the judicial procedure which is imported into the administrative process because of its universality
It is of the essence of most systems of justice certainly of the Anglo Saxon System that in litigation both sides of a dispute must be heard before decision Audi Alterum Partem  was the aphorism of St Augustine which was adopted by the courts at a time when Latin Maxims were fashionable Audi Alterum Partem is as much a principle of African  as it is of English legal procedure a popular Yoruba saying is wicked and iniquitous is he who decides a case upon the testimony of only one party to it TO Elias The Nature of African Customary Law
Courts even more than administrators must observe natural justice
It is said that the does not confer any special rights on the workers they are virtual strangers to the Act and so why should they be heard in the petition for winding up  The duty to hear those asking to be heard is not dependent on the vesting of any right under the very statute in respect of which jurisdiction is being exercised by the court but on any right whatever which may come under threat
Surely it is not the law that rights other than those created by a particular statute may be taken away in proceedings under that statute without affording a hearing to those desiring to be heard
If the statute says only so and so will be heard and no other of course no other will be heard
If the statute does not say who may be heard but prescribes the procedure for the hearing that procedure must be followed by every one who want to be heard and what applies to one will apply to the other
If creditors and contributories desire to be heard and are heard so shall workers
After hearing the workers the court may say that on the facts and circumstances of the case it is not necessary to hear them further but they cannot be turned away at the very threshold
It may be that it is not for them to support or oppose the winding up petition for any of the traditional reasons
But they may make suggestions which may avert winding up save the company and save their own lives
They may have suggestions to make for restructuring the company or for the transfer of the undertaking as a running business
The workers themselves may offer to run the industry forming themselves into a society
They may have a myriad suggestions to 960 make which they can do if they are allowed to be heard
If every holder of a single share out of thousands may be heard if every petty creditor may be heard why can t the workers be heard  It is said that once the workers are allowed to enter the Company Court the flood gates will be opened all and sundry will join in the fray and utter confusion will prevail
These are dark forebodings for which there is no possible justification
The interest of the workers is limited
It is the interest of the others those that battle for control and for power that may create chaos and confusion
It must not be forgotten that the court is the master of the proceedings and the ultimate control is with the court
Parties may not be impleaded for the mere asking or heard for the mere seeking
The court may well ask the reason why if some one seeks to be heard
Workers will not crowd the Company Court and the Court will not be helpless to keep out those whom it is not necessary to hear
It is said that workers will not be allowed to intervene in a partition or a partnership action to oppose partition or dissolution of partnership and so why should they be allowed to intervene in a winding up petition
That is begging the question
There is no reason why workers may not be allowed in appropriate cases to intervene in partition and partnership actions to avert disaster and to promote welfare
As we said impleading and hearing are not for the mere asking and seeking
Re Bradford Navigation Company and passages from textbooks for which the case is the source of authority were relied upon to urge that none but contributories and creditors may be heard in winding up petition
Re Bradford Navigation Company is a relic of an alien past
Fortunately it is not a binding precedent
While we have learnt and borrowed a great deal from British Jurisprudence we have been drawing the line now and then here and there because their law their jurisprudence suits their genius and ours must develop according to our genius
Our needs are different our social political and economic bases are different our aspirations are different our systems are different the stages of our development are different
We have a written constitution which is omnipresent when our laws are made tested interpreted or executed
We look to the constitution for guidance and inspiration when we interpret the laws
The 42nd Amendment of the Constitution has introduced new lights into the Constitution
The Constitution is now openly socialist
The Directive Principles of State Policy repeatedly emphasise the role and interest of the workers
Article 43 A also introduced by the 42nd 961 Amendment contemplates workers  participation in the management of industry
Other Directive Principles require the State to make provision for securing the right to work for securing just and humane conditions of work and for securing the right to an adequate means of livelihood
The State is enjoined to direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment
Obviously it is nationalisation that is in view and nationalisation must mean the setting up of public corporations and the transformation of private corporations into public corporations
Truly the Constitution envisages workers  control and nationalisation as two of the roads to socialism
Private corporations hitherto regarded as bastions of private property and leaders of capitalist economy are undergoing transformation and are surely acquiring the character of public institutions
The public interest element is now quite a predominant factor in the itself
There are several provisions in the which take notice of the element of public interest
There are other enactments like the Monopolies and Restrictive Trade Practices Act the Industries Regulation and Development Act under whose provisions the activities of a company may be scrutinised in the public interest
There are a host of other legislations involving employment and welfare of labour to which the managements of companies are subject
The transformation of a company s character from private to public is going on right before our eyes even as the institution of private property is also losing its diathesis
It is in this context of ferment and development that we must consider the problem before us
There is no sanctity attached to the age of a judgment or to the circumstance that the decision is that of an English Court from where we have borrowed most of our company law
Re Bradford Navigation Company was decided in the heydays of laissez faire at a time when individualism dominated every field and the public interest was but a slow runner
Now the position is reversed
Laissez faire has long been dethroned and all interests are increasingly subordinated to the public interest
Corporations are themselves assuming a public character and function like mini States but surely they will not be allowed to function as slave States where the voice of the slave may never be heard
In Britain itself corporate law and labour law have changed considerably and are still changing
Courts no longer view trade 962 unions with suspicion as conspiracies as they once did
The right to work the right to collectively bargain and the right to strike are well recognised
After nationalisation of certain important and crucial industries by the successive Labour Governments workers  participation in management has become a reality and today a considerable measure of workers  control of management has been achieved in industry
There are now persistent demands that Company Law too should recognise the interest of workers in a company
Prof Gower in his The Principles of Modern Company Law says One section of the community whose interests as such are not afforded any protection either under this head or by virtue of the provisions for investor or creditor protection are the workers and employees of the taken over company
This is a particularly unfortunate facet of the principle that the interest of the company means only the interest of the members and not of those whose livelihood is in practice much more closely involved
Again he says later The vexed question of the relationship between the employees and the company which employs them is in fact a dominant theme in the current debate which flows over from company to labour law
It is generally accepted that it is unreal for company law to ignore as at present our law largely does that the workers are as much if not more a part of the company as the members of it
That is the way the wind is blowing in Britain and there is therefore good reason for holding that the rule in Bradford Navigation Company is not valid in the present times
I may conclude by a reference to the following observations made in another connection by DA Desai J in Panchmahals Steel Ltd vs Universal Steel Traders1
Time honoured approach that the company law must safeguard the interest of investors and shareholders of the company would be too rigid a framework in which it can 963 now operate
New problems call for a fresh approach 
As Prof De Wool of Belgium puts it the company has a three fold reality economic human and public each with its own internal logic
The reality of the company is much broader than that of an association of capital it is a human working community that performs a collective action for the common good
In recent years a debate is going on in the world at large on the functions and foundations of corporate enterprise
The preservationists and the reformers are vigorously propounding their views on the possible reform of company the modern trend emphasising the public interest in corporate enterprise
The case itself is an instructive one and demonstrates how an imaginative Company Judge may help to restructure and infuse new life into a company whose life is ebbing out within the four corners of the statute and keeping in view the interests not merely of the creditors and the contributories but also the interests of the workers
Viewed from any angle of natural justice of the constitution or of the expanding theory of company law there appears to be no obstacles to a Company Judge hearing the workers when asked after a winding up petition is presented
I agree with the order proposed by Bhagwati J VENKATARAMIAH J I had the privilege of reading the draft judgment prepared by my learned brother Bhagwati J but I regret my inability to agree with him
Messrs Ramakrishna Industries P Ltd hereinafter referred to as the Company  which is carrying on its business at Coimbatore in the State of Tamil Nadu is a closely held private limited company governed by the Indian hereinafter referred to as the Act 
The Company s paid up capital is Rs 1595000 divided into 1595 equity shares of Rs 1000 each the bulk of 964 which is held by the members of a Hindu family whose relationship is as follows V Rangaswami Naidu  Chinnammal wife deceased deceased 7 shares 10 shares V Kamalammal R Venkata PR Rama  Mrs Raje wife swami Naidu Krishnan swari 164 shares 20 shares 34 shares Ramakrishnan 85 shares V Radha V Mano V Rajkumar krishnan haran 148 shares 164 shares 146 shares Thulasi  Anusuya K Prabhu R Baba Chandersekhar SRK Prasad 160 shares 168 shares 161 shares The group of R Venkataswami Naidu holds 642 shares and the group of PR Ramakrishnan is holding 608 shares
17 shares stand in the name of late V Rangaswami Naidu and his wife and 300 shares are held by V Rangaswami Naidu Educational Trust
R Venkataswami Naidu and PR Ramakrishnan are trustees for life of V Rangaswami Naidu Educational Trust having control over the shares held by the Trust
They are also treated as Life Directors
Only 5 shares stand in the name of others
V Kamalammal Mrs Rajeswari Ramakrishnan V Radhakrishnan V Manoharan K Prabhu and R Baba Chandersekhar are directors and V Rajkumar is the Managing Director of the Company
The Company is thus under the exclusive control and management of the members belonging to one family
Serious differences having arisen amongst them regarding the management of the affairs of the Company PR Ramakrishnan his wife and sons filed a petition being Company Petition No 30 of 1981 on the file of the High Court of Madras on July 13 1981 for the winding up of the Company under section 965 433e and f of the Act on the ground that it was just and equitable to do so in view of the alleged deadlock that had arisen in the administration of the affairs of the Company
The petition charged the members belonging to the group of R Venkataswami Naidu with acts of misconduct waste and malversation a detailed reference to which is unnecessary for purposes of this case
Along with the above petition the petitioners therein filed Company Application No 843 of 1981 praying for the appointment of a Provisional Liquidator and Company Application No 844 of 1981 for an interim order restraining the Company and other respondents from borrowing moneys from bankers and other financial institutions without prior permission of the Court and from otherwise alienating the assets of the Company pending disposal of the said application
The learned Company Judge passed an interim order on July 13 1981 itself restraining until further orders the eleven respondents named in the application from borrowing any moneys from banks financial institutions or others without prior permission of the Court and from alienating andor creating any charge or encumbrance over any of the assets of the Company in its various enterprises
The above interim order was passed even though on the same date application was opposed by the counsel for the respondents therein
The case was adjourned for further consideration to August 10 1981
On August 19 1981 the above interim order was made absolute in the following terms  In the result there will be an injunction restraining respondents 1 to 6 from borrowing any moneys from banks financial institutions or others and from alienating andor creating any charge or encumbrance over any of the assets of the first respondent company in its various enterprises except that the first respondent company is entitled to honour any pending contract entered into by the company with third parties before the presentation of the application all its existing commitments vis a vis its staff and labourers electric charges central excise duty LIC premium payments due to employees cooperative stores telephone bills and sales tax dues availing the existing bank facilities with any of its bankers subject to the condition that the particulars for all these payments and the source from which such payments were to be met are furnished in detail to the applicants
It is again made clear that the company is always at liberty to approach court for further directions 966 and that the applicant s right to impugn any such transaction under section 5362 is left untouched
In the meanwhile three trade unions viz the Coimbatore District National Textile Employees  Union Coimbatore the Coimbatore District Engineering Workers  Union Coimbatore and the National Textile Workers  Union INTUC applicants in Company Application Nos 880 881 and 883 of 1981 respectively applied to the Court to implead them as respondents to the winding up petition ie Company Petition No 30 of 1981 alleging that their interests had been adversely affected by the interim order which according to them had the effect of preventing the management of the Company from paying amounts due to workers and also making payments for securing supplies to the stores from which the workers were buying articles of food and other provisions
These applications were opposed by the petitioners in the winding up petition stating that the trade unions being neither creditors nor shareholders had no locus standi to be impleaded as respondents to the petition
It may be mentioned here that the Company Petition for winding up had not yet been advertised at that stage and Rule 34 of the Companies Court Rules 1959 was not attracted
The Company Judge dismissed these applications filed by the trade unions for impleading them as respondents by his order dated September 14 1981
Against that order only the National Textile Workers  Union INTUC filed an appeal before the Division Bench of the High Court being OSA No 148 of 1981
That appeal was dismissed by the Division Bench on September 30 1981
The petition for special leave to appeal Civil No 1961 of 1981 was filed before this Court under Article 136 of the Constitution by the National Textile Workers  Union INTUC on November 6 1981
The said Special Leave Petition came up for orders before a Bench of three Judges on November 19 1981
On that date notices were issued to the respondents
The High Court was permitted to pass its orders on the application for appointment of a provisional liquidator which was pending before it but it was ordered that in the event of a provisional liquidator being appointed he should not take any steps which would prejudically affect the workers
The above order was further modified by this Court on December 1 1981
The petition was posted for hearing and disposal before a Bench of five Judges as the matter involved an important question of law relating to the locus standi of the trade unions to be impleaded as respondents to a winding up petition and their right to oppose or support it
967 Petitions for Special Leave to Appeal Civil Nos 10248 and 10249 of 1981 filed respectively by the Coimbatore District National Textile Employees  Union and the Coimbatore District Engineering Workers  Union directly against the order of the Company Judge dated September 19 1981 rejecting their applications for being impleaded as parties to the Company Petition are also heard along with the above Petition for special leave to appeal Civil No 9661 of 1981
At the outset it should be noted that the company law in force in India ie the Act as in England is an amalgam of certain principles of the law of contract of the law of persons and of the law of partnership which require the partners of a firm to be just and faithful towards each other
A company is an association of persons for some common object or objects
A Company has a legal personality
It is an artificial person as opposed to a natural person
It comes into existence on its registration in accordance with law
The memorandum of association and the articles of association of a company which are filed at the time of its registration are considered as the constitutional documents which contain the fundamental terms which govern it
The memorandum contains conditions some of which are basic to its existence even though they may be alterable by following the prescribed procedure
The articles which contain the terms relating to the internal regulation may be altered by the members by passing appropriate resolution
The articles are however subject to the terms of the memorandum
Both these documents should however conform to the Act
The actions of the company are subject to the doctrine of ultra vires whose purpose is to protect investors in the company and to protect the interests of its creditors
The directors of a company are its agents and they stand in a fiduciary relationship to the company
The duties of good faith which are imposed by this fiduciary relationship are virtually identical with those imposed on trustees
The directors are generally expected not to place themselves in a position where their duties towards the company conflict with their personal interests
A company ceases to be in existence on its dissolution which follows the winding up proceedings which may be either by the Court or voluntary winding up either members  voluntary winding up or creditors  voluntary winding up or winding up subject to supervision of the Court
There are detailed provisions in the Act governing the different winding up proceedings referred to above
The principles of administrative law which concern the control of governmental power have not much relevance to the 968 administration of the affairs of a company the primary purpose of administrative law being the imposition of checks on the powers of government or its officers so that they may not either abuse their powers or go out of their legal bounds
In particular the proceedings relating to winding up by Court are subject to the orders of higher courts in appeal and are not amenable to interference by superior courts as in the case of actions of government or its officers
The winding up proceedings by Court are governed by the Act and the Rules made thereunder
We have been taken through various English text books on Company Law such as Palmers Company Law  Gore Browne on Companies  Buckley on the Companies Acts  and Gower s Principles or Modern Company Law
In none of them there is any statement to the effect that officers and employees who are not creditors or contributories of a company for whose winding up a petition is filed would be entitled as of right to be impleaded as parties and to contest the petition
There is also no authority of English Courts recognising such a right in any trade union
It is not also shown that any such right of a trade union is recognised by the Indian law which more or less corresponds to English law in this regard The decision of the Bombay High Court In re
Edward Textile Ltd1 is a clear authority for the proposition that any rate trade unions have no locus standi to oppose a winding up petition
We shall proceed to decide this case on the assumption that the application for impleading was made in fact on behalf of the workers and not by the trade unions
The main argument urged in support of these appeals is that because under section 4453 of the Act the passing of a winding up order of a company by the Court amounts to a notice of discharge to the officers and the employees of the Company except when the business of the company is continued the officers and employees should be afforded an opportunity to contest a winding up petition after being impleaded as parties and if possible avoid the winding up of the company
To appreciate this contention it is necessary to refer to some of the provisions of the Act
Section 433 of the Act sets out six circumstances in which a company may be wound up by the Court
A company may be wound up by the Court on one or more of the following grounds namely a if the company has by 969 special resolution resolved that the company may be wound up by the Court b if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting c if the company does not commence its business within a year from its incorporation or suspends its business for a whole year d if the number of members is reduced in the case of a public company below seven and in the case of private company below two e if the company is unable to pay its debts and f if the Court is of opinion that it is just and equitable that the company should be wound up
Section 439 of the Act provides that an application to the Court for the winding up of a company shall be made by way of a petition presented to the Court subject to the provisions of that section
A petition for winding up of a company may be filed by all or any of the following viz the company its creditors including any contingent or prospective creditors or by any contributory
Such a petition can be filed by the Registrar of Companies and in a case falling under section 243 by any person authorised by the Central Government Sub section 2 of section 439 of the Act treats certain classes of persons as creditors for purposes of that section
Sub section 3 of section 439 treats the holder of a fully paid up share also as a contributory even though he may not be liable to contribute any further sum to the assets of a company in the event of its being wound up and a contributory may file a petition for winding up provided he is not debarred from doing so by sub section 4 of section 439
The Registrar can file a petition under clauses b c d e and f of section 433 of the Act subject to the conditions specified in section 439 except in cases where he is authorised under section 4391f Sub sections 6 7 and 8 of section 439 of the Act refer to the other conditions governing the filing of a winding up petition
When a company has passed a special resolution resolving that the company may be wound up by the Court the employees and workers can have hardly any ground to object to the winding up of the company
The position is the same when any of the defaults mentioned in clauses b and c of section 433 of the Act are committed by the company
The officers and employees of the company also cannot get over the deficiency in the required number of members of a company referred to in clause d of section 433
When a company is unable to pay its debts a creditor may move a petition for the winding up of the company
Such a creditor cannot be compelled to prove his claim not merely against the company but also against the officers and employees
When there is a deadlock 970 in the management of the company arising out of disputes amongst the directors or where some directors without any justification exclude some other directors from the management of the company it would be unreasonable to expect the excluded directors to fight the case both against the directors who are responsible for their exclusion and also against the officers and employees who are neither creditors nor contributories but who may be supporting the contesting directors
The law on the question as to who can be heard as of right in a winding up proceeding is set out in paragraph 1028 in Volume 7 of Halsbury s Laws of England 4th Edition thus 
Only the petitioner the company and creditors and contributories are entitled to appear on the petition other parties have no right to be heard and even if court of first instance elects to hear them as amici curiae they have no right of appeal
 The above passage is based on the decision of the English Court in In re
Bradford Navigation Company1 where Sir WM James L J observed at page 601 thus I am of opinion that this preliminary objection must prevail
It appears to me that the Appellants  argument is based upon a misconception of what a winding up order and what a winding up petition is
It is a substitute for a suit for winding up a partnership
It is a power applicable by the Act of Parliament to corporations as well as to unincorporated societies
Partners have a right to file a bill one against the other and to have the usual decree for the administration of the partnership property and for the settling of the partnership accounts and liabilities
In the case of large companies winding up was thought to be a more convenient course than a common partnership suit but in every other respect it is the same
In a common partnership suit nobody can be made a party or can be heard except the partners themselves and originally a winding up was the same thing
Contributories were the only persons who could be heard but as creditors were interfered with by the operation of the winding up the Act of Parliament has made a winding up a matter both for creditors and contributories
A creditor may present a petition for 971 winding up and both creditors and contributories are heard upon that but it is new to me to say that any person who has an interest in or a right to or in respect of some of the property of the company large or small has right to appear as a litigant here because that company chooses to apply for an order with respect to itself
In this case the company was desirous of being wound up
I am of opinion that the winding up order does not in the slightest degree derogate from any right whatever which any member of the public has with respect to this canal The winding up will deal with such rights as the partners in the partnership can deal with themselves
The Court will deal with it just as the partners themselves could have dealt with it
In the Court below the Court might very well say to a person so situated I should be glad to hear you as amicus curiae if you have an interest that I may know what public grounds there are
 There the Court might use its discretion and think it right to hear such an objection but when it comes before me on a Petition of Appeal from the Order then the Appellant must show that he fills some character in which he has a right to litigate with the company
I am of opinion that he does not fill any such character and that the Petition of Appeal must be refused with costs
 This decision may be of the last century but there is hardly any justification to depart from it even now unless compelled by the statute to do so
That only the company creditors and contributories apart from the Central Government or the Registrar when they choose to intervene under the express provisions of law are entitled to participate in the winding up proceedings is emphasised by sections 447 and 557 of the Act
They read 447
Effect of winding up order An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory 557
Meetings to ascertain wishes of creditors or contributories 1 In all matters relating to the winding up 972 of a company the Court may a have regard to the wishes of creditors or contributories of the company as proved to it by any sufficient evidence b if it thinks fit for the purpose of ascertaining those wishes direct meetings of the creditors or contributories to be called held and conducted in such manner as the Court directs and c appoint a person to act as chairman of any such meetings and to report the result thereof to the Court
2 When ascertaining the wishes of creditors regard shall be had to the value of each creditor s debt
3 When ascertaining the wishes of contributories regard shall be had to the number of votes which may be cast by each contributory
 That a company the Official Liquidator the liquidator creditors and contributories alone can effectively participate in and contest the winding up proceedings is clear from some of the other provisions of the Act governing the winding up proceedings
Under section 4502 of the Act before appointing a provisional liquidator the Court has to given notice to the company and give a reasonable opportunity to it to make its representations if any unless for special reasons to be recorded in writing the Court thinks fit to dispense with such notice
The Court may under section 466 of the Act at any time after making a winding up order on the application either of the Official Liquidator or of any creditor or contributory make an order staying the winding up proceedings on being satisfied that there are good reasons to pass such an order
Section 4783 authorises any creditor or contributory in addition to the Official Liquidator to take part in the public examination of promoters directors etc
held for the purpose of enquiring into the conduct of such promotees or directors in connection with the promotion or formation or the conduct of the business of the company
Section 517 of the Act provides that in a voluntary winding up an arrangement entered into by the company and the creditors as provided therein is binding on the creditors and any creditor or contributory who is aggrieved by such arrangement may 973 appeal to the Court
Under section 518 the liquidator or any contributory or any creditor may apply to the Court in a voluntary winding up proceeding to determine any question arising in the winding up of a company
Under section 542 of the Act on the application of the Official Liquidator or the liquidator or any creditor or contributory of the company the Court may if it thinks fit and proper so to do declare that any persons who were knowingly parties to the carrying on of business of the company with intent to defraud creditors or any other person shall be personally responsible for all or any of the debts or liabilities as the Court may direct
The Court can exercise power to assess damages against delinquent directors of a company which is ordered to be wound up under section 543 on the application of the Official Liquidator or of the Liquidator or of any creditor or contributory made within the prescribed time
In the case of a voluntary winding up under section 546 any creditor or contributory may apply to the Court with respect to exercise of any power by the liquidator under section 5461
Section 5491 of the Act provides that at any time after the making of an order for the winding up of a company by or subject to the supervision of the Court any creditor or contributory of the company may if the Supreme Court by rules prescribed so permit and in accordance with and subject to such rules but not further or otherwise inspect the books and papers of the company
Any creditor or contributory may under section 556 apply to the Court to enforce the duty of liquidator to make returns etc
These and other provisions of the Act show that only the company the Official Liquidator liquidator creditors contributories or the Registrar have a statutory right to participate as of right in the winding up proceedings as provided in the Act
The workers or their trade unions have not been given any such right
The words every person  in Rule 34 of the Companies Court Rules 1959 which is almost similar to the corresponding English Rule do not entitle a worker who is neither a shareholder nor a contributory to support or oppose a winding up petition under that Rule because they refer only to a person who is otherwise entitled to do so under the Act
We should also bear in mind that an anamolous result that may flow from the acceptance of the case of the workers is that whereas in a winding up by Court they may get an opportunity to contest the petition the voluntary winding up proceedings or winding up under the supervision of the Court would go on without any such contest although in all cases ultimately the 974 workers will be discharged from service
A construction which leads to such a discriminatory result should be avoided
When once we extend the right to contest a winding up petition to workers either on the principle of equity or of administrative law on the same principle it would logically follow that all others who may have dealings with such as commission agents selling agents etc
whose contracts with the company are going to be terminated by reason of its liquidation also have to be allowed to contest the winding up proceedings
Such a claim is not permissible
On this question it may be useful to refer to the case of Ex Parte Maclure
In that case a person entered into an agreement with an insurance company to act as their agent for five years and to transact no business except for the company in consideration of which he was to receive a fixed salary and also a commission of 10 percent on all business transacted
Before the five years expired the company was wound up voluntarily
It was held affirming the decision of Romilly MR that the agent was not entitled to prove against the company for the loss of his commission during the remainder of the term of five years
James LJ said I am clearly of opinion that the Master of the Rolls was right It is the case of a person engaging a servant and saying I engage you for five years I will pay you 500 a year for that period that sum is secured to you and then in order to give you an inducement to carry on the business effectually properly and prudently I will give you 10 per cent commission upon the net profits to be earned by that business
I am of opinion that this was a contract which did not give the servant the right to determine what the extent of the business was to be
He could not call upon the directors to issue new policies to accept new premium or to take new risks if they were not minded to do it
He could not say Such a person has brought in a policy of insurance and you must accept that Because if he had a right to say You must carry on the business  he would also have a right tc say You must carry on the business in the usual and proper manner  and that would be giving a servant the right of controlling the master in the mode in which he chose to carry on his business
Now I am quite satisfied that the meaning of the contract was nothing of the kind
It was never intended to give the servant the right of dictating as to the extent of business whether more or less or nothing but be simply took the chance of 975 the company finding it a profitable business and carrying it on
The company had a right to reduce the business to a minimum  and if they had a right to reduce it to a minimum they had a right to reduce it to nothing as far as he was concerned
 It is because of some doubts that had been expressed earlier about the continuance of the employment of the employees of a company ordered to be compulsorily wound up that section 4453 was enacted making it clear that the passing of the order of winding up amounts to a notice of discharge of the employees concerned
Section 4453 corresponds to the termination of service brought about by the abolition of a post under a Government or by the closure of a business neither of which as the law stands today requires compliance with the principles of natural justice
It may however attract section 25 FFF of the in appropriate cases
In the Act there are specific provisions dealing with the rights of employees of a company
Sections 417 to 420 of the Act deal with employees  securities and provident funds and clauses b to f of section 5301 deal with preferential payments to be made to the employees of a company in liquidation from out of its assets
Section 635 B of the Act deals with the protection to which the employees are entitled during investigation into the affairs of a company
Rule 152 of the Companies Court Rules 1959 read with Form No 67 relates to proof of arrears of workmen s wages
The right to resist a winding up petition is not one such right
It is true that public interest which may include within its scope interests of employees of a company has to be kept in view by the Court as observed in Bhalchandra Dharmajee Makaji and Ors
vs Alcock Ashdown and Co Ltd and Ors1 in exercising certain powers under the Act
Sections 388 B 394 396 397 and 408 of the Act do refer to the concept of public interest
These provisions deal with the power of the Central Government to remove managerial personnel from office on the recommendation of the High Court compromises arrangements and reconstruction of companies and power of the Court and the Government to prevent oppression or mismanagement of affairs of a company
They do not however state that trade unions can as of right intervene in the proceedings arising under them
976 It is not correct to say that there is no other remedy at all for workmen who are likely to be affected by the winding up order made by the Court
Section 15 A of the Industrial Development and Regulation Act 1951 Act No 65 of 1951 which applies to textile industry as well confers power on the Central Government to carry out investigation into the affairs of a company in liquidation
It reads  15 A Power to investigate into the affairs of a company in liquidation 1 Where a company owning an industrial undertaking is being wound up by or under the supervision of the High Court and the business of such company is not being continued the Central Government may if it is of opinion that it is necessary in the interest of the general public and in particular in the interests of production supply or distribution of articles or class of articles relatable to the concerned scheduled industry to investigate into the possibility of running or restarting the industrial undertaking make an application to the High Court praying for permission to make or cause to be made an investigation into such possibility by such person or body of persons as that Government may appoint for the purpose
2Where an application is made by the Central Government under sub section 1 the High Court shall notwithstanding anything contained in the 1 of 1956 or in any other law for the time being in force grant the permission prayed for
 The provisions of Chapters III AA and III AB of the Industrial Development and Regulation Act 1951 confer on the Central Government powers regarding management or control of industrial undertakings owned by companies in liquidation and power to provide relief to certain industrial undertakings including those to which Chapter III A is applicable
Chapter III AC of that Act deals with the power of the Central Government in respect of liquidation and reconstruction of companies
In particular section 18 FD1 of that Act inter alia provides that if on receipt of the report submitted by the authorised person the Central Government is satisfied in relation to a company owning the industrial undertaking which is being wound up by the High Court that its assets and liabilities are such that in the interests of its creditors and 977 contributories the industrial undertaking should be solid as a running concern as provided in section 18 FE thereof it may by order decide accordingly
Sub section 2 of section 18 FD of that Act states that notwithstanding anything contained in sub section 1 thereof the Central Government may prepare a scheme for reconstruction of a company if it is satisfied having regard to all relevant circumstances mentioned therein that it is proper to do so
When such a scheme is prepared the Central Government has to send it to the registered trade unions if any of the employees concerned for their suggestions and objections
See section 18 FF3
Any scheme finally approved would prevail notwithstanding anything contained in sections 391 to 394 A both inclusive of the Act
It is open to the workers or their trade unions to move the Central Government to take appropriate steps under the aforesaid provisions in order to protect the interests of the workers who are likely to be affected by the winding up orders
Article 43A of the Constitution clearly states that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings establishments or other organisation engaged in any industry
The High powered Expert Committee on Companies and MRTP Acts headed by Justice Rajinder Sachar of the Delhi High Court has also made certain recommendations about provisions to be made for workers  participation in management of companies
Vide paragraphs 18127 to 18143 of the Report
Parliament may take early steps to implement some of the recommendations made by the said Committee
It is significant that there is no recommendation made even in this Report about the right of trade unions to contest winding up petitions
If the workers are issued shares then they would no doubt be entitled to participate in the winding up proceedings as contributories
This may be one way of solving the problem by legislative means
Another way of providing a forum to the workers representative in matters relating to the winding up of a company is to amend section 292 of the Act as suggested in para 1127 and para 18137 of the Report of the Sachar Committee
Those paragraphs are reproduced below for ready reference 1127 The workers  representation on company Board makes it necessary to provide that companies must ensure that certain decisions are necessarily taken at the Board level and the Board do not delegate 978 the powers in respect of these matters to committees or other functionaries in the organisation otherwise the participation of workers at the Board level is likely to prove ineffective
The powers and functions which cannot be delegated by the Board and which must be within the exclusive jurisdiction of the Board to take policy decision are in respect of the following matters a winding up of the company b changes in the memorandum and articles of association c changes in the capital structure of a company eg as regards the relationship between the Board and the shareholders a reduction or increase in the share capital as regards the relations between the Board and senior management the issue of securities on a takeover or merger d disposal of a substantial part of the undertaking e the allocation or disposition of resources to the extent not covered in a to d above and f the appointment removal control and remuneration of management whether as members of the Board or in their capacity as executives or employees
The suggestion regarding a to e above is on the same line as the present power of the Board to declare dividend
In other words the shareholders will not be able to exercise powers mentioned in a to e above unless recommended by the Board
We would therefore suggest that section 292 be amended to provide for the exercise of the foregoing powers of the Board of a company which is required by law to ensure participation of workers in management 18137 In order to ensure effective participation by workers  representatives at the Board level section 292 should be amended to provide that certain decisions are necessarily taken only at the Board level and no delegation to Committees of the Board or to other functionaries is made
 979 These suggestions emphasise that at present workers have no right to contest winding up proceedings
It is also open to Parliament to make a law on the lines of sections 63 to 69 of the Employment Protection Act 1975 passed by the Parliament in the United Kingdom to give any additional protection necessary for workmen who are likely to be affected adversely by the winding up proceedings
See Palmer s Company Law 22nd Edn
I p 919
Parliament may also consider the introduction of a provision corresponding to section 74 of the of 1980 passed by the British Parliament
Such steps may mitigate any hardship that may be caused to the workers as a consequence of the winding up of a company
It has to be emphasised that the privilege of making suggestions to the Court in the public interest is different from the right to be impleaded as a party with the concomitant right to enter into contest with the other parties and of taking an order in appeal before higher courts
The latter right has to be conferred expressly by the statute on any person who wishes to exercise it
Under the existing law the workers or their unions may make any suggestions to the Court at any stage but they cannot claim to be impleaded as parties to the winding up petition as of right
The decision of this Court in Fertilizer Corporation Kamgar Union Regd Sindri and Ors
vs Union of India and Ors1 does not lend any support to the case of the trade unions
In that case which attracted the principles of administrative law the petitioner trade union pleaded that Article 14 Article 191g and Article 311 of the Constitution had been violated by the sale of the plant and equipment of a factory in which its members were working
Ultimately the petition was dismissed by this Court
One of the distinguishing features of that case is that the factory involved in that case was in the public sector and owned by the Government against which a petition under Article 32 of the Constitution was maintainable
Chandrachud CJ observed in the course of his judgment at pages 60 61 thus Secondly the right of Petitioners 3 and 4 and of the other workers to carry on the occupation of industrial workers is not in any manner affected by the impugned 980 sale
The right to pursue a calling or to carry on an occupation is not the same thing as the right to work in a particular post under a contract of employment
If the workers are retrenched consequent upon and on account of the sale it will be open to them to pursue their rights and remedies under the Industrial laws
But the point to be noted is that the closure of an establishment in which a workman is for the time being employed does not by itself infringe his fundamental right to carry on an occupation which is guaranteed by Article 191g of the Constitution
Supposing a law were passed preventing a certain category of workers from accepting employment in fertiliser factory it would be possible to contend then that the workers have been deprived of their right to carry on an occupation
Even assuming that some of the workers may eventually have to be retrenched in the instant case it will not be possible to say that their right to carry on an occupation has been violated
It would be open to them though undoubtedly it will not be easy to find out other avenues of employment as industrial workers
Article 191g confers a broad and general right which is available to all persons to do work of any particular kind and of their choice
It does not confer the right to hold a particular job or to occupy a particular post of one s choice
Even under Article 311 of the Constitution the right to continue in service falls with the abolition of the post in which the person is working
The workers in the instant case can no more complain of the infringement of their fundamental right under Article 191g than can a Government servant complain of the termination of his employment on the abolition of his post
The choice and freedom of the workers to work as industrial workers is not affected by the sale
The sale may at the highest affect their locum but it does not affect their locus to work as industrial workers
This is enough unto the day on article 191g
 On the question of locus standi of workers to maintain the petition the learned Chief Justice observed at pages 65 66 thus That disposes of the question as regards the maintainability of the writ petition
But we feel concerned to point out that the maintainability of a writ petition which 981 is correlated to the existence and violation of a fundamental right is not always to be confused with the locus to bring proceedings under Article 32
These two matters often mingle and coalesce with the result that it becomes difficult to consider them in water right compartments
The question whether a person has the locus to file a proceeding depends mostly and often on whether he possesses a legal right and that right is violated
But in an appropriate case it may become necessary in the changing awareness of legal rights and social obligations to take a broader view of the question of locus to initiate a proceeding be it under Article 226 or under Article 32 of the Constitution
If public property is dissipated it would require a strong argument to convince the Court that representative segments of the public or at least a section of the public which is directly interested and affected would have no right to complain of the infraction of public duties and obligations
Public enterprises are owned by the people and those who run them are accountable to the people
The accountability of the public sector to the Parliament is ineffective because the parliamentary control of public enterprises is diffuse and haphazard
We are not too sure if we would have refused relief to the workers if we would have found that the sale was unjust unfair or mala fide Krishna Iyer J in his concurring opinion observed at pages 70 71 thus A pragmatic approach to social justice compels us to interpret constitutional provisions including those like articles 32 and 226 with a view to see that effective policing of the corridors of power is carried out by the court until other ombudsman arrangements a problem with which Parliament has been wrestling for too long emerges
I have dwelt at a little length on this policy aspect and the court process because the learned Attorney General challenged the petitioner s locus standi either qua worker or qua citizen to question in court the wrong doings of the public sector although he maintained that what had been done by the Corporation was both bona fide and correct
We certainly agree that judicial interference with the Administration cannot be meticulous in our Montesquien 982 system of separation of powers
The court cannot usurp or abdicate and the parameters of judicial review must be clearly defined and never exceeded
If the Directorate of a Government company has acted fairly even if it has faltered in its wisdom the court cannot as a super auditor take the Board of Directors to task
This function is limited to testing whether the administrative action has been fair and free from the taint of unreasonableness and has substantially complied with the norms of procedure set for it by rules of public administration
 A reading of the aforesaid passages shows that the Court was concerned in that case with operations in a public sector company and the activities of the Government
These observations cannot have any relevance to a case involving the affairs of a company which is governed only by express provisions of company law and other relevant statutes
As the law stands today workers cannot contend that a factory owned by and individual proprietor on his death should not be divided amongst his heirs even though they may lose their jobs
They cannot resist a partition suit in which one of the items of property in respect of which relief is claimed is the factory in which they are working filed by a junior member of Hindu joint family against the manager contending that the said factory is the separate property of the manager and should not therefore be partitioned merely because they may be discharged from service in the event of the suit being decreed
They cannot resist the suit for dissolution of a firm which owns the factory in which they are working even though at the distribution of the assets of the firm the factory may have to be dismantle and sold
The position cannot be different in the case of a company which is wound up by the Court
As the law stands today the workers in a factory owned by a company do not have any hand in the birth of a company in its working during its existence and also in its death by dissolution
If the law expressly says that a memorandum of a company should be signed by some future employees of the company or that there should be workers  representatives on its board of directors or that the company should not be wound up without consulting the wishes of the workers then they can certainly claim all such rights
Workers  participation in the affairs of a company or the ushering in of an industrial democracy is quite a laudable object
That is the reason 983 for enacting Article 43 A of the Constitution which requires the State to take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings establishments or other organisations engaged in any industry
The Legislature has not taken any concrete steps in this regard
But can the Court step in and introduce drastic amendments into the company law  Surely it cannot
Even though there is no express statement in our constitutional law incorporating in it the doctrine of separation of powers in the interpretation of the Constitution this Court has broadly adopted the said doctrine
See Smt
Indira Nehru Gandhi vs Shri Raj Narain 1
Even though by virtue of its power of interpretation of law the Court in an indirect way is making law it should be stated that there are well recognised limitations on the power of the Court making inroads into the legitimate domain of the Legislature
If the Legislature exceeds its power this Court steps in
If the Executive exceeds its power then also this Court steps in
If this Court exceeds its power what can people do  Should they be driven to seek an amendment of the law on every such occasion  The only proper solution is the observance of restraint by this Court in its pronouncements so that they do not go beyond its own legitimate sphere
It is true that there are now new kinds of weapons like consumers  protection agitations against big companies whose activities are likely to affect the life of the community adversely
But for those agitations to be effective the Legislature should wake up and make appropriate laws under which the consumers can bring action against erring companies
In the absence of any such law this Court cannot issue directions to the companies on the basis of complaints from the members of the public
There are several areas where it is necessary for the Legislature to make law
A reading of the provisions in Part IV of the Constitution shows that many of them are still to be implemented by the passing of appropriate legislation
Article 41 of the Constitution dealing with the right to work Article 43 dealing with living wages etc for workers Article 44 which insists upon the introduction of a uniform civil code for all citizens and Article 47 dealing with the duty of the State to raise the level of nutrition and the standard of living of the people are some of the articles which have to be implemented either by the Legislature or by the Executive
984 Would this Court compel the Executive by issuing a writ to implement the policy underlying Article 41 Article 43 and Article 47 without being backed up by necessary laws  Would this Court enforce a uniform civil code in respect of all citizens without the aid of an appropriate legislation even though the concept of equality is enshrined in the Constitution and Article 44 specifically requires the State to endeavour to secure for all citizens a uniform civil code  It may not do so The only solution for many of these social problems is to appeal to the appropriate organs of the State to do their assigned job in the best interests of the Community
It is wrong to think that by some strained construction of law the Court can find solution to all problems
In this very case when arguments were going on I suggested that it may be appropriate to issue notice to the Company Law Administration of the Union of India so that the Court could have the benefit of the views of the Government
It was not however acceded to by the majority
The presence of the Union Government in the present case as a party might have brought to its attention the need for initiating necessary legislation if it really felt that it was advisable to do so for providing an opportunity to workers of a company also to contest the winding up proceedings
It is however a matter for regret that no tangible steps appear to have been taken to amend the Act even though the Sachar Committee Report which contains many recommendations which when implemented would make the companies which are centres of economic power accountable to the society at large and make them fall in line with the current views on their social responsibilities was forwarded to the Government more than four years ago
It may be that the employees or their trade unions are interested in requesting the Court to dispose of the factory as going concern so that their employment may not be affected
How are they interested in supporting one set of directors against whom charges of waste misappropriation and mismanagement are made by the other set who are alleged to have been totally excluded from management by attempts amounting to oppression  In the instant case the trade unions concerned have filed almost a common statement containing their grounds of objection along with their notice to appear in the proceedings filed under Rule 34 of the Companies Court Rules 1959 pursuant to the advertisement issued by the 985 Court
The grounds of objection filed by the Coimbatore District National Textile Employees  Union are set out below in extenso  1
That the Company Petition is not maintainable under the  hereinafter referred to as the Act 
That no case has been made out by the petitioners under section 433f of the Act
That on the facts and circumstances of the case it is not just and equitable that the company should be wound up
That another remedy is available to the petitioners and hence the Company cannot be wound up by virtue of section 4432 of the Act
That the objector craves leave to reserve his right to amplify and elaborate the above grounds in the counter affidavit to be filed to the company petition
 It is seen from the foregoing that the trade unions are only interested in supporting the cause of the respondents against whom allegations are made by the petitioners in the Company Petition by making certain general submissions without traversing the various allegations made in it
The respondents who are already on record and who are actually contesting the petition are capable of looking after their interests and need not rely upon the support of the trade unions who are neither creditors nor contributories and who do not know the details of the internal administration of the affairs of the Company
The petitioners in the Company Petition would be in a more disadvantageous position if they have to face the opposition of the trade unions also
Such a situation should not be created by extending the area of controversy by a liberal interpretation of the provisions of law when there are no compelling reasons to do so
The High Court has in this case passed necessary orders in order to protect the interests of the employees in Company Application No 844 of 1981 and in CMP No 11159 of 1981
The order passed in Company Application No 844 of 1981 is already set out above
986 In CMP No 11159 of 1981 the High Court has passed the following order This is a petition filed by the appellants in OSA No 128 of 1981 for permitting the first appellantcompany to raise with its Bankers viz Bank of Baroda Coimbatore a temporary loan of an amount not exceeding Rs 525000 for the purpose of paying bonus to the workers of Jothi Mills as per the Memorandum of settlement entered into between the Company and its workers under section 181 of the on 10101979 by pledging or charging the assets of the Company  
Though in form the appellants have prayed for raising of a loan for honouring the commitment of Rs 525000 towards bonus for the workers of Jothi Mills by pledging or charging the assets of the company during the argument the learned counsel for the appellants was willing to avail of the existing facilities in the Central Bank as provided in the order Itself
Though for availing the existing bank facilities there is no need for any specific direction from this Court as the order appealed against itself gives such liberty the learned counsel for the appellants by way of abundant caution requires such an interim direction in this petition
The learned counsel for the respondents pointed out that availing of the existing facilities referred to in the order of Shanmukhan J is a facility that was available as on 1371981 we think the learned counsel for the respondents is well founded in this contention
sic But even so if the Banks as on 1371981 the petitioners are entitled to avail the same in order to honour the commitment relating to bonus for workers
Since the order under appeal itself permits the petitioners to avail of the existing Bank facilities with any of its Bank though the application in form asked for raising of the loan with the Bank of Baroda Coimbatore we make it clear that it is open to the petitioners to avail of the Bank loan facilities with the Central Bank within the limits prescribed as on 1371981
This is the only clarification that need be given in this petition and no further orders are necessary emphasis added These orders show that the High Court has kept in its view the interests of workers while giving directions in the case from 987 time to time and that there is no longer any ground to complain about
According to the petitioners in the winding up petition the occasion for the complaint of the workers had been cleverly engineered by the contesting respondents
Be that as it may as the orders of the High Court stand today the workers can always approach it by way of a company application for appropriate orders whenever they feel that their working conditions are adversely affected during the pendency of the proceedings
It is not necessary that the workers or the trade unions should be impleaded as parties to the Company Petition enabling them to contest the winding up petition
Their presence on record is not necessary for complete and effectual adjudication of the winding up petition
The trade unions are therefore neither necessary nor proper parties to the winding up petition on the facts and in the circumstances of this case including the element of public interest involved in any liquidation proceeding
Before concluding it should be stated that it is not correct to hold that the order of the High Court smacks of elitism  or sounds like a relic of feudal age  or is an obnoxious  one
The High Court has decided the case in accordance with the prevailing view in the country
No case in which a different view is taken is cited before us
Nobody disputes the proposition that law should not be static
It should no doubt grow but it should have its legitimate birth and in a case like this in the precincts of the Legislature
It should be the result of the exercise of legislative judgment particularly when a departure from express provisions of a statute or an established practice is to be made
Judges are not expected to know all aspects of every such matter
A discussion involving a comprehensive view of all interests which are likely to be effected by any decision which makes a serious departure from a well settled principle of law would not take place before a court where only the parties to a case or their lawyers are heard
Members of the public also would not know what is happening in courts
The publicity which a proceeding in the Legislature would receive is not given to the proceedings in Court
Even the elected representatives of the people who are charged with the duty of making laws may not know what is happening in a court of law
Therefore it is always better to leave such matters to the decision of the Legislature instead of the court sometimes by a majority of one assuming power to make a new law
It is no doubt true that the view of the High Court is also in conformity with the view prevailing in England
That does not mean that the High Court has surrendered its judgment to a foreign 988 practice because that is the very view which is being followed till now in the Indian courts
We should not forget that the very concept of company law is foreign to our country
It originated in Great Britain and our company law contained in successive Acts passed by the Indian Legislature is modelled on British law and experience
There is a large body of company jurisprudence which is common to all the Commonwealth countries
There may however be some local changes but the pattern appears to be common
The practice of relying on foreign decisions whatever may be their age only when they are in conformity with what we wish to hold and of condemning them only on the ground that they are ancient foreign decisions when they do not accord with our views is not correct
A foreign decision even though it may not be binding is either worthy of acceptance or not depending upon the reasons contained in it and not on its origin or age
There is no reason why we should not follow a well reasoned foreign decision unless it is opposed to our ethics tradition and jurisprudence or otherwise unsuited to Indian conditions
Can we say that the law of habeas corpus which has found its way into India from England is bad only because it came from a foreign country or has an ancient origin  The writs in the nature of habeas corpus mandamus prohibition quo warranto and certiorari referred to in article 32 and article 226 of the Constitution of India the rule of promissory estoppel the principle of audi alterum partem and many other principles which are applied by the Indian courts are all of foreign origin
Even the socialist principle is not entirely of Indian origin
It is difficult to shut our eyes to realities of life
Moreover it is difficult even though it may not be impossible to administer the company law as it is now in force in India without the aid of the principles laid down by some of the leading English cases like Salomon vs Salomon  Co1 laying down the principle of corporate personality Ashbury Railway Carriage  Iron Co vs Riche2 dealing with the rule of ultra vires Royal British Bank vs Turguand3 laying down the rule of indoor management  Hedley Byrne  Co Ltd vs Heller  Partners Ltd4 which establishes the liability for negligent mis statements in prospectuses Foss vs 989 Harbottle1 and Burland vs Earle2 dealing with the principle of the fraud on a minority  and Ebrahimi vs Westbourne Galleries3 dealing with the application of the just and equitable  principle in ordering the winding up of a company
A reading of the decision of this Court in Needle Industries India Ltd  Ors
vs Needle Industries Newey India Holding Ltd  Ors4 rendered by Chandrachud CJ shows the importance of foreign decisions in deciding case arising under the Indian Company law which out of necessity has to keep pace with the well established principles prevailing in many other parts of the world for sustaining international trade and commerce
Adoption of an universal system of mercantile law and obedience to the conventions of the International Labour Organisation constitute two important compulsions of modern international economic life
It may be that the workers who are likely to be affected by the winding up need a larger protection
That can be done only by legislative action
This Court cannot however make any order which will conflict with the existing law
In the result the appeals fail and are dismissed
No costs
BAHARUL ISLAM J
I have carefully read the judgments prepared and orders proposed by my Brothers Bhagwati and Venkataramiah JJ
I entirely agree with Bhagwati J and regret my inability to agree with Venkataramiah J Any provision of any statute has to be interpreted keeping in view the letter and spirit of the Constitution
Any interpretation that is not in consonance with the letter and spirit of the Constitution is obnoxious and unacceptable
In the winding up proceedings in question the National Textile Workers  Union filed the petition before the High Court with a prayer to be heard before any order for winding up was passed
The reason was the workers  apprehension of termination of their services in case of winding up of the Company
It is true there is no express provision in the giving the workers any right to be heard in a winding up proceeding before the Court
There is no express bar either
Learned counsel for Respondents Nos
6 to 9 in support of his contention that the workers had no right to be 990 heard in a winding up proceeding cited Halsbury s Laws of England volume 7 page 614 para 1028 4th Edition
The learned author has stated the law on the subject thus  Only the petitioner the Company and creditors and contributories are entitled to appear on the petition  other parties have no right to be heard and even if the Court at the first instance elects to hear them as amici curiae they have no right of appeal
 This statement of the law has been made on the authority of the judgment in Bradford Navigation Co rendered as early as 1870 1970 5 Ch
A Page 600
Learned counsel also cited Palmer Company Precedents 17th Edition Vol 2 page 77 in which the law to the above effect was stated
Learned counsel has submitted that the Company Law in India is the same as in the Company Law in England
The law cited may be good law for England with altogether a different system of economy  but is abhorrent to India particularly after the Constitution 42nd Amendment Act 1976 by which the Socialist and Secular concepts have been added and incorporated into the Preamble of our Constitution
Our Democratic Republic  is no longer merely Sovereign  but is also Socialist  and Secular 
A Democratic Republic is not Socialist if in such a Republic the workers have no voice at all
Our Constitution has expressly rejected the old doctrine of the employers  right to hire and fire 
The workers are no longer ciphers  they have been given pride of place in our economic system
The workers  right to be heard in a winding up proceeding has to be spelt out from the Preamble and Articles 38 and 43 A of the Constitution and from the general principles of natural justice
AMARENDRA NATH SEN J
I have read the judgment of my learned brother Bhagwati J and also the judgment of my learned brother Venkataramiah J I cannot persuade myself to agree with the judgment of my learned brother Bhagwati J
I agree with the judgment and order proposed by my learned brother Venkataramiah J I shall indicate my reasons for the view that I have taken
The material facts of this case have been set out in the judgment of my learned brother Bhagwati J and also in the judgment of my learned brother Venkataramiah J
The arguments advanced 991 from the Bar have been considered by both of them
It does not therefore become necessary for me to reproduce them in this judgment
Whether the employees of a Company in their capacity as employees can claim as a matter of right to appear and be heard in a petition presented to court for the winding up of the Company is the question for decision in this case
The right of an employee in his capacity as such to be heard in a proceeding for winding up of a company has been canvassed as a proposition of law
The contention urged on behalf of the trade unions representing the workers of the company is that whenever a petition is presented to a Court for the winding up of a company the employees of the company have the right to appear and be heard in the said proceeding
The principal argument advanced on behalf of the trade unions representing the workers is that the employees of a company are equal partners of the management of the company if not the more important one and the company in view of the socio economic role it plays and it has to play in the country can no longer be considered to be the concern of the members of the company
Further the argument is that the employees very materially contribute to the working of a company and help the company in effectively playing its socio economic role and promoting the interests not only of the company but also the larger interests of the nation and an order of winding up seriously affects the interest of the employees virtually taking away the means of their livelihood
It has been submitted that as an order of winding up of the company affects so seriously the interests of the employees the employees must have a say and must be heard in a proceeding for winding up before the Court
I have earlier observed that the arguments advanced from the Bar on behalf of the trade unions have been noted at length by my learned brothers Bhagwati and Venkataramiah JJ
The arguments no doubt express noble sentiments which I share  but in my opinion the arguments fail to establish that the employees have a right to appear and be heard in a petition presented to a Court for the winding up of a company
If the right is to be conceded to employees on these grounds it must logically follow that every employee of a company whether he is a worker within the meaning of the or he is a member of the management 992 staff must enjoy the same right to appear and be heard in every such proceeding for the winding up of the company
An order for winding up affects all the employees of a company whether they are workers belonging to any trade union or not or whether they are officers of the company high or low not being members of any union or association
Further if the right to participate in a winding up proceeding is to be judged from the view point of the interest of any party who may be prejudicially affected as a result of an order of winding up being made various other parties who have trade relations with the company must necessarily be held to have the same right to be heard in a winding up proceeding
It is common knowledge that various persons apart from the employees of the company also depend for their survival on the supplies of various materials ingredients and components to the company and with the liquidation of a company all such persons who are making their living out of their dealings with the company have to go without occupation and have to face disaster
Persons having existing contracts with the company are also seriously prejudiced when an order of winding up of the company is made
If the test of injury and adversely affecting the interests are considered to be sufficient to entitle a party to a hearing in a proceeding on the footing that they are persons aggrieved no suit for dissolution of a partnership can also be decided without impleading the employees of the firm and various other parties having trade relations with the firm as the dissolution of a firm may prejudicially affect the interests of the employees or the various other persons dealing with the firm
It has to be borne in mind that a company can only be wound up in accordance with the provisions of the Indian 
The right to have a company wound up is a right created by the Statute
The entire proceeding in relation to the winding up of a company is regulated by the statute namely the Indian hereinafter referred to as the Act and the procedure to be followed is further supplemented by the provisions contained in the rules made under the Act known as the Companies Court Rules 1959 hereinafter referred to as the Rules
The various modes of winding up of the company under what circumstances a company may be wound up by Court and who are the persons competent to present a petition to Court for the winding up of the company and who are the persons entitled to 993 be heard on such a petition are provided for in the Act and in the Rules
It has to be borne in mind that apart from the right of the Court to order the winding up of a company in an appropriate case the Act recognises that a company may go into liquidation without any intervention by the Court and also under the supervision of Court provided the necessary conditions laid down in the Act in this regard are complied with
Where the Company goes into liquidation without reference to court or under the supervision of the Court the employees of the company who have to meet the same fate of losing their employment as and when the company is wound up by the Court do not and cannot have any voice or say in the procedure to be adopted for the liquidation of the company
In the case of winding up of any company by Court the parties who can move the Court for winding up of the company are specifically mentioned in the Act and only such persons are competent to present the winding up petition
The procedure to be followed on such a petition for winding up of the company being presented to court and the parties who are entitled to be heard on the petition are dealt with and provided for in the Act and the Rules
The right of appearance and of being heard in a winding up proceeding has been conferred on persons whom the Legislature considered to be necessary or proper parties for effective adjudication of the proceeding before the Court
The Act provides that a creditor to whom a company is indebted in a sum exceeding Rs 500 and whose debt has not been paid by the company notwithstanding the statutory notice being served on the company is entitled to present a petition for the winding up of the company and in such a case the creditor whose debt cannot be properly disputed is entitled to an order of winding up on the ground of insolvency of the company
If a company is commercially insolvent and is unable to pay its debts the company has necessarily to be wound up and the employees of the company can have hardly anything to say in such a case for assisting the Court in deciding the matter
My learned brother Venkataramiah J has referred to the various provisions of the Act and also to relevant Rules which go to indicate that no such right of the employees to appear and participate in a winding up proceeding is recognised
Rule 34 of the Rules on which strong reliance was placed by the learned counsel 994 appearing on behalf of the trade unions is not of any assistance
The said Rule reads as follows Every person who intends to appear at the hearing of a petition whether to support or oppose the petition shall serve on the petitioner or his advocate notice of his intention at the address given in the advertisement
The notice shall contain the address of such person and be signed by him or his advocate and same as otherwise provided by these rules shall be served or if sent by post shall be posted in such time as to reach the addressee not later than two days previous to the day of hearing and in the case of a petition for winding up not later than five days previous to the day of hearing
Such notice shall be in Form No 9 with such variations as the circumstances may require and where such person intends to oppose the petition the grounds of his opposition or a copy of his affidavit if any shall be furnished along with the notice
Any person who has failed to comply with this rule shall not except with the leave of the Judge be allowed to appear at the hearing of the petition
 This particular Rule appears in Part I and in Part I of the Rules general provisions are made
This Rule only lays down the procedure to be followed by any person who intends to be heard at the hearing of a petition whether to support or oppose the petition and this Rule does not deal with the competence or right of any particular person to appear at the hearing of any petition nor does this rule create any right in any person
Part III of the Rules makes specific provisions with regard to winding up by Court
Rule 9B in Part III reads Every contributory or creditor of the company shall be entitled to be furnished by the petitioner or by his advocate with a copy of the petition within 24 hours of his requiring the same on payment of the prescribed charges
 For properly and effectively adjudicating upon any winding up petition the parties must necessarily know the grounds contained in the petition on which the Court has been moved for the winding up of the company to make representation with regard to the same
Rule 9B requires that copies of the petition in terms of the said rules are to be furnished to every contributory or creditor of the company and the said rule makes no mention of the employees of 995 the company
I agree with my brother Venkataramiah J that on a proper consideration of the relevant provisions of the Act and also of the Rules an employee of a company in his capacity as such does not have any right to appear and be heard in a petition presented to Court for the winding up of the company
It will be noticed on an analysis of the provisions of the Act that from the stage of the formation of the company till the very last stage of its dissolution company jurisprudence does not recognise any right of an employee in his capacity as an employee of the company in the matter of formation of the company its functioning and its ultimate winding up
The Act however makes necessary provisions as to deposit of employees  security monies with a Scheduled Bank in section 417 of the Act
The Act also makes suitable provision in Section 418 about Provident Funds of Employees
Necessary provisions for preferential payment of wages or salary of an employee in case of winding up of a company have been made in Section 530 of the Act
For safeguarding what the Legislature considers to be public interest the Legislature in various sections of the Act has made suitable provisions casting various obligations on the company with penal consequences and has conferred powers on the Government
The introduction of article 43A in the Constitution which reads The State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings establishments or other organisations engaged in any industry does not affect the position in any way
Participation in the management of a company does not by itself create any right in any such person to appear and be heard in a winding up petition
Unless otherwise named personally as a party to a winding up petition no person merely on the ground that he happens to be in the management of the company is entitled as a matter of right to appear and be heard in a winding up proceeding
Persons in management of the company may if they are so authorised appear and participate in a winding up proceeding on behalf of the company and representing the company
They will however be entitled to appear if they are members or creditors of the company in such capacities but not as members of the management
A director of a company must of necessity be a member of the company as provided in the Act
996 It is worth mentioning that the Indian is based on the English and both the Acts contain more or less similar provisions
The provisions of the Indian with regard to the winding up of the Company are almost alike to the provisions contained in the English 
As early as 1870 the English Court in Re Bradford Navigation Co1 held on a consideration of the provision of the English Act that no person had a right to be heard against a petition for winding up of a company except creditors and contributories
It is no doubt true that this decision still holds good and is considered to be good law as will be evident from the comments in authoritative text books on the subject
In Halsbury s Laws of England 4th Edn Vol
VII at p 614 it has been laid down Only the petitioners the company and creditors and contributories are entitled to appear on the petition other parties have no right to be heard and even if the Court of first instance elects to hear them as amici curiea they have no right of appeal
 In Palmer s Company Precedents 7th Edn Part II the following observations appear at p 77 Any creditor or shareholder may appear to support or oppose the petition
But no one else can do so even if he has an indirect interest in the continued existence of the company
 On the basis of the decision in Re Bradford Navigation Co supra the following comments have been made at p 546 in Buckley on the  14th Edn
I  The only persons entitled to be heard are the company the creditors and contributories
The Court may in its discretion hear other persons who have an interest in order to learn what public grounds there are in favour of or in opposition to the winding up but such persons can be heard only as amici curiae and cannot appeal Various legislations for the benefit and welfare of the employees have since been passed in England and the Company Act in England also did undergo various changes from time to time
The employees of a company in England are affected in the same way as the employees of a company in India when an 997 order for winding up of the company is made
It cannot be said that workers in England are not conscious of their status and position and of the important role they play in the proper functioning of a company and in England there are also the trade unions of the workers for defending protecting and improving the conditions and rights of the workers
Despite all these the right of an employee or any trade union representing the workers to participate and be heard in a winding up petition is not recognised in England
I have to observe that Mr Ramamurthi learned counsel appearing for one of the trade unions has placed very strong reliance on the following observations of this Court in the case of Hind Overseas Private Limited vs Raghunath Prasad Jhunjhunwala and Ors1 Although the Indian is modelled on the English  the Indian Law is developing on its own lines
Our law is also making significant progress of its own as and when necessary
Where the words used in both the Acts are identical the English decisions may throw good light and reasons may be persuasive
But as the Privy Council observed long ago in Ramanandi Kuer vs Kalawati Kuer2
It has often been pointed out by this Board that where there is a positive enactment of the Indian Legislature the proper course is to examine the language of that statute and to ascertain its proper meaning uninfluenced by any consideration derived from the previous state of the law or of the English Law upon which it may have been founded
If it was true in the twenties it is more apposite now that the background conditions and circumstances of the Indian society the needs and requirements of our country call for a somewhat different treatment
We will have to adjust and adapt limit or extend the principles derived 998 from English decisions entitled as they are to great respect suiting the conditions of our society and the country in general always however with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company
 These observations to my mind are of no assistance in deciding the question involved in this appeal
These observations were made in different context
These observations however indicate that where the provisions of the Indian Act and the English Act are alike the decisions of the English Courts throw good light and the reasons may be persuasive it is no doubt true that the decisions of the English Courts do not have a binding effect and the proper course for this Court while considering or interpreting an enactment of the Indian Legislature is to examine the language of the Statute to ascertain its proper meaning unifluenced by any consideration derived from the provisions of the English Law upon which it may have been founded
Principles of construction of a statute are well settled
It is significant to note that no decision of any Court in India could be cited where the claim of an employee in his capacity as an employee to participate and be heard in a petition for winding up of the company as a matter of right has been accepted
On the other hand the settled legal position in this country so far has been that no employee could claim any such right
It is interesting to note that though in this country also the provisions of the have undergone various changes from time to time and various enactments for the welfare of the workers have been passed from time to time the Legislature in our country did not consider it proper or necessary to amend the provisions of the Indian to confer any such right on the workers
I however wish to make it clear that although an employee of a company as an employee of a company cannot claim to appear and be heard in a petition for winding up of the company as a matter of right yet in any appropriate case the Court in a winding up proceeding may require or permit any employee to appear at any stage of a winding up proceeding and hear him if the Court be of the opinion that the employee or the employees should be heard in 999 the interests of administration of justice and for proper disposal of any matter
It appears that in this very case the Court at an earlier stage of the proceeding had in fact heard the employees and redressed their just grievance
With these observations I agree with the order proposed by my learned brother Venkataramiah J HLC Appeals allowed


Summary:
The respondents were two groups of shareholders of a private limited company which had a thousand persons under its employment
A group of shareholders filed a petition for winding up the company under cls
e and f of section 433 of the Indian along with applications for an interim injunction and for appointment of a provisional liquidator
The Company Judge passed an order of injunction restraining the company from borrowing any moneys from banks financial institutions or others without the prior permission of the court
Three trade unions representing the employees of the company filed applications for being impleaded as respondentsinterveners in the winding up petition claiming that the interests of the employees had been adversely affected by the interim order
The Company Judge rejected these applications
A Division Bench of the High Court turned down the appeal preferred by one of the unions and that union sought special leave to appeal against the order of the Division Bench while the other two unions sought special leave to appeal against the order of the Company Judge
The Court granted special leave to all the three unions and permitted the Company Judge to pass orders on the application pending before him for appointment of a provisional liquidator with the direction that the liquidator shall not take any steps which would prejudicially affect the employees
It was contended on behalf of the appellants that since an order winding up a company amounts to notice of termination of services of its employees under section 4453 and since even an interim order freezing the resources of the company might affect the interest of the employees by making it difficult for the company to pay their wages etc it would be contrary to fair judicial procedure and violative of the rule audi alteram partem to deny the employees the right to be heard before any order prejudicially affecting their interests is made
The 923 employees who contribute materially to the working of a company and enable it to effectively play its socio economic role are equal if not more important partners in the running of the company and they must be heard in a proceeding for winding up of the company
It was further urged that under r34 of the Companies Court Rules 1959 the employees have a right to appear at the hearing of a winding up petition either to support or to oppose it
On behalf of the respondents it was contended that the employees of a company have no locus standi in a winding up petition as the Act does not contain any provision conferring such a right on them that since the Act is a self contained Code exhaustive in regard to all matters relating to a company no such right could be spelt out in their favour outside the provisions of the Act that r 34 of the Companies Court Rules 1959 does not confer such a right on them and that under the various provisions of the Act including sections 439 and 440 it is only the creditors and contributories and in certain specified contingencies the Registrar and the Central Government who are entitled to participate in the proceedings for winding up of a company
It was further contended that in this case it was not even the employees but the three trade unions who had applied for being heard and since the trade unions had no right to be heard their applications had been rightly rejected
Allowing the appeals  HELD  By Majority  Per Bhagwati Chinnappa Reddy and Baharul Islam JJ
Venkataramiah and Amarendra Nath Sen JJ
dissenting The workers of a company are entitled to appear at the hearing of the winding up petition whether to support or to oppose it
They have a locus standi to appear and be heard both before the petition is admitted and an order for advertisement is made as also after the admission and advertisement of the petition until an order is made for winding up the company
The workers also have a right of appeal against a winding up order
But when a winding up order has become final the workers ordinarily would not have any right to participate in any proceeding in the course of winding up the company though there may be rare cases where in a proceeding in the course of winding up the interests of the workers may be involved and in such a case it may be possible to contend that the workers must be heard before an order is made by the court
Even in an application for appointment of a provisional liquidator the workers have a right to be heard if they so wish but neither the petitioner in the winding up petition nor the court is under any obligation to give notice of such application to the workers
956 A E In the instant case the circumstance that the workers were not heard by the Company Judge before he passed the order appointing the provisional liquidator would not have the effect of vitiating the order but it would be open to the workers to apply to the court for vacating that order
956 F G i The making of a winding up order on a petition for winding up would have an adverse consequence on the workers inasmuch as the continuance of their service would be seriously jeopardised and their right to work and earn 924 their livelihood would be disastrously imperilled
It is an elementary principle of law that no order involving adverse civil consequences can be passed against any person without giving him an opportunity to be heard against the passing of such order
If the audi alteram partem rule has been held to be applicable in a quasi judicial or even in an administrative proceeding it would a fortiori apply in a judicial proceeding such as a petition for winding up of a company
No system of law which is designed to promote justice through fair play in action can permit the court to make a winding up order which has the effect of bringing about termination of the services of the workers without giving them an opportunity of being heard against the making of such order
Unless there is express provision in the Act which forbids the workers from appearing at the hearing the workers must be held entitled to appear and be heard in the winding up petition
950 A E State of Orissa vs Dr Bina Pani   AK Kraipak vs Union of India and Maneka Gandhi vs Union of India 1978 2 SCR 621 referred to
ii There is no provision in the Act which excludes the workers from appearing at the hearing of a winding up petition
Merely because the right to apply for winding up a company is not given to them it does not follow as a necessary consequence that the workers have no right to appear and be heard in a winding up petition filed by one or more of the persons specified in section 439
In fact there would be no point in conferring that right on the workers since they cannot have any interest in demolishing the enterprise which is the source of their livelihood
So also the circumstance that the right to make applications or be consulted in the course of the winding up of a company is conferred under section 440 and other provisions of the Act only on the creditors and contributories does not in any way militate against the right of the workers to appear and be heard in the winding up petition
Once the winding up order is made the assets of the company have to be realised the creditors to be paid and if there is any surplus it has to be distributed among the contributories and therefore at that stage it is only the creditors and contributories who have an interest and that is why in the course of the winding up it is the creditors and contributories who have been given a voice
Sections 440 464 466 478 517 542 543 549 556 557 and 560 deal with a stage after the winding up has commenced
These sections have nothing to do with the question whether the company should be wound up or not
D F 951 B 951 C E 949 A H iii After the amendment of sections 397 and 398 of the Act by sections 10 and 11 of the Companies Amendment Act 1963 the court while deciding whether a company should be bound up has to take into consideration not only the interest of the shareholders and editors but also public interest in the shape of the need of the community and the interest of employees
It is therefore axiomatic that the workers must have an opportunity of being heard for projecting and safeguarding their interest before a winding up order in made
951 G 952 E F In the instant case the Division Bench of the High Court after conceding that the court had to take into consideration the interest of the workers went wrong in holding that the workers had no locus standi to file an application for being heard in the winding up petition
952 G H 953 A B 925 Fertilizer Corporation Kamgar Union and Ors
vs Union of India and Ors
   referred to
Bhalchandra Dharmajee Makaji and Ors
vs Alcock Ashdown and Co Ltd and Ors
  approved
iv It is true that according to the statement of law contained in the leading text books on Company Law it is only the Company the creditors and the contributories who are entitled to appear in a winding up petition and no other persons have a right to be heard
This statement of the law is based on a decision rendered by the English Courts over a hundred years ago when a company was regarded merely as a legal device brought into being as a result of a contractual arrangement between the shareholders for the purpose of carrying on trade or business and the workers were looked upon as no more than employees of the company working under a master and servant relationship and the interest of the public as consumers or otherwise was a totally irrelevant consideration
It can have no validity in the present times when the entire concept of a company has changed
953 F H In re
Bradford Navigation Company 1870 5 Ch
AC 600 held inapplicable
In re
Edward Textiles Limited  overruled
v Our Constitution has shown profound concern for the workers and given them a pride of place in the new socio economic order envisaged in the Preamble and the Directive Principles of State Policy
Article 43A states that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings establishments or other organisations engaged in any industry
The constitutional mandate is therefore clear and undoubted that the management of the enterprise should not be left entirely in the hands of the suppliers of capital but the workers should also be entitled to participate in it
In a socialist pattern of society the enterprise which is a centre of economic power should be controlled not only by capital but also by labour
It cannot therefore be contended that the workers should have no voice in the determination of the question whether the enterprise should continue to run or be shut down under an order of the court
The workers who have contributed to the building of the enterprise have every right to be heard when it is sought to demolish that centre of economic power
946 C 947 D F People s Union for Democratic Rights vs Union of India and Ors
WP No 8143 of 1981 decided on September 18 1982 referred to
vi It is not only the shareholders who have supplied capital who are interested in the enterprise which is being run by a company but the workers who supply labour are also equally interested because what is produced by the enterprise is the result of labour as well as capital
The owners of capital bear only limited financial risk and otherwise contribute nothing to production while labour contributes a major share of the product
While the former invest only a part of their moneys the latter invest their sweat and toil in fact their life itself
926 The workers therefore have a special place in a socialistic pattern of society
They are no more vendors of toil they are not a marketable commodity to be purchased by the owners of capital
They are producers of wealth as much as capital they supply labour without which capital would be impotent
945 G H 946 A B vii The concept of a company has undergone radical transformation in the last few decades
The old nineteenth century view which regarded a company merely as a legal device adopted by shareholders for carrying on trade or business as proprietors has been discarded and a company is now looked upon as a socioeconomic institution wielding economic power and influencing the life of the people
The view that a company is the property of the shareholders can no longer be regarded as valid
Apart from capital and labour there are other factors which contribute to the production of national wealth the financial institutions and depositors who provide the additional finance required for production and the consumers and the rest of the members of the community who are vitally interested in the product manufactured
A company according to the new socio economic thinking is a social institution having duties and responsibilities towards the community in which it functions and one of its paramount objectives is to bring about maximisation of social welfare and common good
This necessarily involves reorientation of thinking in regard to the duties and obligations of the company not only vis a vis the shareholders but also vis a vis the rest of the community affected by its operations such as workers consumers and the Government representing the society
942 B 943 A G 944 C D Chiranjit Lal Chowdhri vs Union of India 1950 S CR 869 referred to
Panchmahal Steel Ltd vs Universal Steel Traders approved
per Chinnappa Reddy J concurring i Quite apart from section 4453 it is plain that the future of the workers is at stake and their right to work is in jeopardy as a result of the presentation of the winding up petition
The workers are so intimately tied up that their interest in the survival and the well being of the company is much more than the interest of any shareholder
They cannot be denied a hearing when their very existence is under threat of extinction
957 D G ii It is not correct to say that natural justice is exclusively a principle of administrative law
It is first a universal principle and therefore a rule of administrative law
Courts even more than administrators must observe natural justice
959 A C iii The Act does not prohibit a hearing to the workers
It does not provide for all situations
The law falls to be applied to a growing and changing subject matter
The Company Judge must acknowledge the transformation which corporations are presently undergoing from capitalist contrivances into socialist instruments and recognize the reality of the workers interest
The 927 working classes all the world over are demanding workers  control and industrial democracy
They want the right to work to be secured
Our Constitution has accepted the workers  entitlement to control and it is one of the Directive Principles of State Policy
It is in this context of changing norms and waxing values that the workers  demand to be heard has to be judged
957 G H 958 B C E F G iv The duty to hear those asking to be heard is not dependent on the vesting of any right under the very statute in respect of which jurisdiction is being exercised by the Court but on any right whatever which may come under threat
It is not the law that rights other than those created by a particular statute may be taken away in proceedings under that statute without affording a hearing to those desiring to be heard
959 D E v It is not correct to say that once the workers are allowed to enter the company court the flood gates will be opened all and sundry will join in the fray and utter confusion will prevail
The court is the master of the proceedings and the ultimate control is with the court
Parties may not be impleaded for the mere asking
The court may ask the reason why if someone asks to be heard
960 B C vi The contention that since workers are not allowed to intervene in a partition or dissolution of partnership they should also not be allowed to intervene in a winding up petition cannot be accepted
There is no reason why workers may not be allowed in appropriate cases to intervene in such actions to avert disaster and to promote welfare
960 D vii There is good reason for holding that In re
Bradford Navigation Company is not valid in the present times
It was decided in the heydays of laissez faire at a time when individualism dominated every field and the public interest was but a slow runner
Now the position is reversed
In Britain itself Corporate law and labour law have changed considerably
After nationalisation of certain important and crucial industries a considerable measure of workers  control of management of industry has been achieved in that country
One should rather look to the Constitution for guidance and inspiration while interpreting the laws
After the 42nd Amendment the Constitution is openly Socialist
The Directive Principles of State Policy emphasize the role and interest of the workers
article 43A contemplates workers  participation in the management of the industry
There are several provisions in the Act itself which take notice of the element of public interest
There are other enactments like the Monopolies and Restrictive Trade Practices Act and the Industries Regulation and Development Act under whose provisions the activities of a company may be scrutinized in public interest
There are legislations involving employment and welfare of labour to which the managements of the companies are subject
The problem before the court must be considered in this context of ferment and development
G H 962 A B 960 G H 961 D F In re
Bradford Navigation Company 1870 5 Ch
AC 600 held inapplicable
Panchmahal Steel Ltd vs Universal Steel Traders approved
928 per Baharul Islam J concurring The statement of law contained in the English authorities cited by counsel for respondents may be good law for England with altogether a different system of economy but it is not applicable in our country particularly after the Constitution 42nd Amendment Act 1976 by which the Socialist and Secular concepts have been incorporated in the Preamble to our Constitution
The workers  right to be heard in a winding up proceeding has to be spelt out from the Preamble and articles 38 and 43 A of the Constitution and from the general principles of natural justice
990 D F per Venkataramiah and Amarendra Nath Sen JJ
dissenting Under the existing law the workers or their unions may make any suggestions to the Court at any stage but they cannot claim to be impleaded as parties to the winding up petition as of right
The privilege of making suggestions to the court in public interest is different from the right to be impleaded as a party with the concomitant right to enter into contest with the other parties and of making an order in appeal before higher courts
The latter right has to be conferred expressly by the statute in any person who wishes to exercise it
979 D i The principles of administrative law have not much relevance to the administration of the affairs of a company the primary purpose of administrative law being the imposition of checks on the powers of government or its officers so that they may not either abuse their powers or go out of their legal bounds
In particular the proceedings relating to winding up by court are subject to the orders of higher courts in appeal and are not amenable to interference by superior courts as in the case of actions of government or its officers
967 H 968 A B ii The law on the question as to who can be heard as of right in a winding up proceeding is clear and is based on the decision of the English Court in In re
Bradford Navigation Company
The decision may be of the last century but there is hardly any justification to depart from it even now unless compelled by the statute to do so970 B D 971 E In re
Bradford Navigation Company 1870 5 Ch
AC 600 referred to
Halsbury s Laws of England 4th Ed Vol
7 Para 1028 referred to
iii That only the company creditors and contributories apart from the Central Government or the Registrar when they choose to intervene under the express provisions of the Act are entitled to participate in the winding up proceedings is clear from sections 439 447 and 557
Sections 4502 466 4783 517 518 542 543 5461 5491 and 556 show that only the Company the official liquidator liquidator creditors contributories or the Registrar have a statutory right to participate as of right in the winding up proceedings
The workers or their trade unions have not been given any such right
969 C D E H 973 A F 929 In re
Edward Textiles Ltd approved
iv Under section 433 a company may be wound up by the court on one or more of the following grounds  a if the company has by special resolution resolved that it may be wound up by court b if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting c if the company does not commence its business within a year from its incorporation or suspends its business for a whole year d if the number of members is reduced in the case of a public company below seven and in the case of a private company below two e if the company is unable to pay its debts and f if the court is of opinion that it is just and equitable that the company should be wound up
As regards the ground mentioned at a when a company has passed a special resolution that it may be wound up by the court the employees and workers can have hardly any ground to object
The position is the same when any of the defaults mentioned in b and c are committed by the company
The officers and employees of the company also cannot get over the deficiency in the required number of members of a company referred to in d above
When a company is unable to pay its debts and a creditor moves a petition for winding up under e above he cannot be compelled to prove his claim not merely against the company but also against the officers and employees
When there is a deadlock in the management of the company arising out of disputes amongst the directors or when some directors without any justification exclude some other directors from the management of the company and a petition for winding up is filed under f above it would be unreasonable to expect the excluded directors to fight a case both against the directors who are responsible for their exclusion and also against the officers and employees who are neither creditors nor contributories but who may be supporting the contesting directors
968 H 969 A B 969 F H 970 A B In the instant case it is seen from the grounds of objection filed by the trade unions that they are only interested in supporting the cause of one set of respondents against the other by making certain general submissions
The petitioners in the Company Petition would be in a more disadvantageous position if they have to face the opposition of the trade unions also in addition to the respondents to that petition
Such a situation should not be created by extending the area of controversy by a liberal interpretation of the provisions of law when there are no compelling reasons to do so
985 E G v There are specific provisions in the Act and the Rules sections 417 to 420 5301b to f and 635 B and r 152 read with Form No 67 dealing with the rights of employees of a company
The right to resist a winding up petition is not one such right
975 D E vi It is because of some doubts that had been expressed earlier about the continuance of the employment of the employees of a company ordered to be compulsorily wound up that section 4453 was enacted making it clear that the passing of the order of winding up amounts to a notice of discharge of the employees concerned
Section 4453 corresponds to the termination of service brought about by the abolition of a post under a Government or by the closure of a business neither of which as the law stands today requires compliance with the principles of natural justice
975 B C 930 vii It is true that public interest which may include within its scope interests of employees of a company has to be kept in view by the courts in exercising certain powers under the Act
Sections 388 B 394 396 397 and 408 do refer to the concept of public interest
These provisions deal with the powers of the Central Government and the Court
They do not however state that trade unions can as of right intervene in the proceedings arising under them
975 F H Bhalchandra Dharmajee Makaji and Ors
vs Alcock Ashdown and Co Ltd and Ors referred to
In the instant case the High Court has passed necessary orders to protect the interests of the employees
As these orders stand today the workers can always approach the High Court by way of a company application for appropriate orders whenever they feel that their working conditions are adversely affected during the pendency of the proceedings
It is not necessary that the workers or the trade unions should be impleaded as parties to the winding up petition enabling them to contest the same their presence on record is not necessary for a complete and effectual adjudication of the petition
The trade unions are therefore neither necessary nor proper parties to the winding up petition on the facts and in the circumstances of this case including the element of public interest involved in any liquidation proceeding
985 H 986 H 987 A C viii In Fertilizer Corporation Kamgar Union Regd Sindri and Ors
vs Union of India and Ors
 1981 2 SCR 52 the court was concerned with operations in a public sector company and the activities of the government
The observations contained therein cannot have any relevance to a case involving the affairs of a company which is governed only by the express provisions of company law and other relevant statutes
982 C ix As the law stands today the workers in a factory owned by a company do not have any hand in the birth of a company in its workingur ding its existence and also in its death by dissolution
Workers  participation in the affairs of a company or the ushering in of an industrial democracy is quite a laudable object
That is the reason for enacting article 43 A article 43 A clearly states that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings etc
The High powered Expert Committee on Companies and MRTP Act has made certain recommendations in this behalf in paragraphs 1127 and 18137 of its report and it is for the Parliament to take steps to implement them
The legislature has not taken concrete steps in this regard
The suggestions made by the committee emphasize that at present workers have no right to contest winding up proceedings
It is significant that there is no recommendation made even in this report about the right of trade unions to contest winding up petitions
The court cannot step in and introduce drastic amendments into the company law
Many of the Directive Principles are still to be implemented by passing appropriate legislation
This Court cannot compel the executive by issuing writs to implement the policy underlying them
There are well recognized limitations on the power of the court making inroads into the legitimate domain of the legislature
If the legislature exceeds its power this Court steps in
If the executive exceeds its power 931 then also this court steps in
If this court exceeds its power what can people do  Should they be driven to seek an amendment of the law on every occasion  The only proper solution is the observance of restraint by this court in its pronouncements so that they do not go beyond its own legitimate sphere
It may be that the workers who are likely to be affected by the winding up need a larger protection
That can be done only by legislative action
This Court cannot make any order which will conflict with the existing law
982 G H 983 A 977 E F 983 G 983 B D 989 C x The proposition that law should not be static but should grow cannot be disputed
But it should be the result of the exercise of legislative judgment particularly when a departure from express provisions of a statute or an established practice is to be made
A discussion involving a comprehensive view of all interests which are likely to be affected by any decision in such a matter is not possible before a court where only the parties to a case or their lawyers are heard
987 D F xi It is not correct to say that there is no other remedy at all for workmen who are likely to be affected by the winding up order made by the court
It is open to the workers or their trade unions to move the Central Government to take appropriate steps under the Industrial Development and Regulation Act 1951 the provisions of which provide that where a company owning an industrial undertaking is being wound up by or under the supervision of the High Court and the business of such company is not being continued the Central Government may investigate into the possibility of running or restarting the industrial undertaking provide relief to it or take steps to ensure that the undertaking is sold as a running concern or prepare a scheme of reconstruction of the company and send it to the trade unions of employees concerned inviting their suggestions and objections
976 A H 977 A C xii When once the right to contest a winding up petition is extended to workers either on the principle of equity or of administrative law on the same principle it would logically follow that all others who may have dealings with the company such as commission agents selling agents
whose contracts with the company are going to be terminated by reason of its liquidation also have to be allowed to contest the proceedings
Such a claim is not permissible
974 B Ex parte Maclure  referred to
xiii It is no doubt true that the view of the High Court is also in conformity with the view prevailing in England
That does not mean that the High Court has surrendered its judgment to a foreign practice because that is the very view which is being followed till now in the Indian Courts
A foreign decision is either worthy of acceptance or not depending upon the reasons contained in it and not its origin or age
There is no reason why we should not follow a well reasoned foreign decision unless it is opposed to our ethics tradition and jurisprudence or otherwise unsuited to our conditions
Moreover it is difficult even though it may not be impossible to administer the company law as it is now in force in India without the aid of the principles laid down by some of the leading English cases
987 H 988 A F 932 Needle Industries India Ltd and Ors
vs Needle Industries Neway India Holding Ltd and Ors   referred to
per Amarendra Nath Sen J agreeing with Venkataramiah J i If the right to participate in a winding up proceeding is to be judged from the view point of the interest of any party who may be prejudicially affected as a result of an order of winding up being made it must logically follow that not only every employee of the company but also various other parties and persons who have trade relations or dealings with the company must necessarily be held to have the same right to be heard in such a proceeding further no suit for dissolution of a partnership can also be decided without impleading the employees of the firm and other parties having trade relations with the firm
992 A E 991 H ii A company can only be wound up in accordance with the provisions of the Act
The right to have a company wound up is a right created by the statute
The entire proceeding in relation to the winding up is governed by the provisions of the Act and the Rules
The Act recognises that a company may go into liquidation without any intervention by the Court and also under the supervision of the court
Where the company goes into liquidation without reference to court the employees of the company who have to meet the same fate of losing their employment cannot have any voice or say in the procedure to be adopted for liquidation of the company
992 F G 993 B C iii The right of appearance and of being heard in a winding up proceeding has been conferred on persons whom the legislature considered to be necessary or proper parties for effective adjudication of the proceeding before the court
If a company is commercially insolvent and is unable to pay its debts it has necessarily to be wound up and the employees can have hardly anything to say in such a case for assisting the court in deciding the matter
993 E G iv Although an employee cannot claim to appear and be heard in a winding up petition as a matter of right the court may in any appropriate case require or permit any employee to appear at any stage of a winding up proceeding and hear him if it is of the opinion that it is necessary in the interest of administration of justice and for proper disposal of any matter
998 H 999 A v The legislature has made suitable provisions in the Act for safeguarding what is considered to be in the interest of employees or in public interest
The introduction of article 43A in the Constitution does not affect the position in any way
Participation in the management does not by itself create any right to appear and be heard in a winding up petition
Unless otherwise named personally as a party to such a petition no person merely on the ground that he happens to be in the management of the company is entitled to appear and be heard in a winding up proceeding
Persons in management may if so authorised appear and participate in such a proceeding on behalf of the company
995 D 995 E H 933 vi The Indian and the English Companies Acts contain similar provisions
As early as in 1870 the English court held that no person had a right to be heard against a petition for winding up of a company except creditors and contributories
That decision still holds good and is considered good law
The English Act has undergone changes from time to time with the passing of various legislations for the benefit and welfare of employees
An order winding up a company affects the employees in England in the same way as it does in India
It cannot be said that workers in England are not conscious of the important role they play in the functioning of a company
Despite all these the right of an employee or any trade union representing the workers to participate and be heard in a winding up petition is not recognised in England
Even in our country though the provisions of the Act have undergone changes and various enactments for the welfare of the workers have been passed from time to time the legislature has not considered it proper or necessary to amend the Act to confer any such right on the workers
996 A D 996 H 997 A B 998 F In re Bradford Navigation Company 1870 5 Ch
AC 600 referred to
Halsbury s Laws of England 4th Ed Vol
p 614 Palmer s Company Precedents 7th Ed Part II p 77 and Buckley on the  14th Ed Vol
I p 546 referred to
Hind Overseas Private Ltd vs Raghunath Prasad Jhunjhunwala and Ors
   distinguished
By majority Per Bhagwati Chinnappa Reddy and Baharul Islam JJ
Venkataramiah and Amarendra Nath Sen JJ
dissenting Trade unions are competent to make applications before the Company Judge hearing a winding up petition on behalf of the workers represented by them
956 H In this case the applications were made by the unions on behalf of the workmen represented by them and though made in the name of the Unions the applications were in reality and substance applications of the workmen who were members of each respective Union
The controversy therefore really is not whether the unions of workmen are entitled to be heard in a winding up petition but whether the workmen have such right when a winding up petition is filed against a company
939 G H per Venkataramiah and Amarendra Nath Sen JJ
dissenting In none of the English text books on Company Law there is any statement to the effect that trade unions of officers and employees of a company for whose winding up a petition is filed would be entitled as of right to be impleaded as parties and to contest the petition
It is not also shown that any such right of a trade union is recognised by the Indian Law which more or less corresponds to English Law in this regard
The decision of the Bombay High Court in In re Edward Textiles Ltd is a clear authority for the proposition that at any rate trade unions have no locus standi to oppose a winding up petition
We shall proceed to decide this case on the assumption that the application for impleading was made in fact on behalf of the workers and not by the trade unions
968 C F 934 In re Edward Textiles Ltd  referred to
By the Full Court Rule 34 of the Companies Court Rules 1959 does not confer a right on the workers to appear at the hearing of a winding up petition
955 G 973 G 994 E F per Bhagwati Chinnappa Reddy and Baharul Islam JJ The object and purpose of r 34 is not to confer a right on anyone to appear at the hearing of the winding up petition but merely to provide for the procedure to be followed before a person who is otherwise entitled to appear in a winding up petition can be heard in support of or in opposition to the winding up petition
955 F per Venkataramiah J The words every person in r 34 of the Companies Court Rules 1959 do not entitle a worker who is neither a shareholder nor a contributory to support or oppose a winding up petition under that rule because they refer only to a person who is otherwise entitled to do so under the Act
An anomalous result that may flow from the acceptance of the case of the workers is that whereas in a winding up by court they may get an opportunity to contest the petition the voluntary winding up proceedings or winding up under the supervision of the court would go on without any such contest although in all cases ultimately the workers will be discharged from service
A construction which leads to such a discriminatory result should be avoided
973 G H 974 A per Amarendra Nath Sen J Rule 34 only lays down the procedure to be followed by any person who intends to be heard at the hearing of a petition it does not deal with the right of any person to appear at the hearing nor does it create any such right in any person
Rule 9B in part III of the Rules makes specific provision in that behalf
994 E F