1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.6583 OF 2007 Dr. Manohar Harjeevan Seth ..Petitioner. Vs. Bhalchandra Vaman Pandit and others ..Respondents. .... Mr. S.S. Pakale i/b Mr. Sachin Manale for the Petitioner. Ms. Amrapali Kasbe for Respondent No.1. .... CORAM: DR. D.Y. CHANDRACHUD, J. 3rd April, 2008. P.C. : 1. Rule, made returnable forthwith. Counsel appearing for the Respondent waives service. By consent of the learned counsel, taken up for hearing and final disposal. 2. Prior to 15th September, 1997 the Petitioner was a shareholder and director of a company by the name of Liv-in Transfusion (Pvt.) Ltd. By a Memorandum of Understanding dated 15th September, 1997 the Petitioner together with the members of his group transferred their sharecapital to the Thopte family. The First Respondent preferred an application under Section33-C(2) of the Industrial Disputes Act, 1947 alleging that he was working as a 2 clerk cum superintendent in the company since December 1990 on monthly wages of Rs.2,000/- and that despite performing his duties he had not received the agreed salary. According to the First Respondent out of an amount of Rs.3.16 lacs due from the company, he had received only Rs.1.04 lacs leaving in balance an amount of Rs.2.11 lacs. The Petitioner denied that the First Respondent had been engaged as an employee and submitted that in any event upon the transfer of the shareholding to the transferee shareholders, the Petitioner had divested himself of any control over the company. The application was allowed by the Labour Court by an order dated 30th June, 2007. Both the Petitioner and the Second Respondent have been jointly and severally held liable to pay an amount of Rs.1,47,000/- to the First Respondent. 3. On behalf of the Petitioner it has been urged that a perusal of the Memorandum of Understanding particularly Clause 3 (D) thereof would show that the liability in respect of the unpaid dues of any workman was not assumed by the Petitioner. Moreover, it has been urged that ex facie even the case of the First Respondent is that he was an employee of the company. It was 3 submitted that the employer in this case was not the Petitioner and the company being a juristic entity with a corporate personality, the liability to pay the unpaid wages, if any, cannot be fastened upon the Petitioner in his personal capacity. On the other hand, the contention of the First Respondent is that prior to the date of the Memorandum of Understanding he was employed by the Petitioner while after the date of the transfer of the shareholding, it was the Second Respondent who became the employer. Reliance was sought to be placed on a certificate dated 1st July, 1996 issued by one of the directors of the company when the First Respondent was in need of a loan. 4. Having heard the learned counsel, I am of the view that the application filed by the First Respondent under Section 33-C(2) could not have been maintained as against the Petitioner in his personal capacity. Counsel appearing for the First Respondent has during the course of the hearing relied on a certificate dated 1st July, 1996 issued by a director of the company certifying that the First Respondent was working in the company from 1st January, 1991 as an Office Superintendent and as a permanent employee was drawing monthly emoluments of Rs.2,500/-. The certificate 4 records that as on the date thereof he was working with the company. The certificate upon which reliance has been paced clearly demonstrates that the Petitioner was not the employer and it was the company which was the employer of the First Respondent. The company was a corporate entity with a juristic personality of its own. An application under Section 33-C(2) lies against the employer and merely because the Petitioner at the material time held shares of the company or was a director of the company would be no ground to fasten the liability on the Petitioner. 5. It was next urged that under the Memorandum of Understanding the Petitioner had, as a matter of fact, not assumed any liability in respect of the unpaid dues of any workers. Clause 3 of the Memorandum of Understanding is to the following effect : “3) The party of the first part at their costs and consequences, jointly and/or severally in their personal relations and in their relations as directors of the said company, hereby undertake, agree and own the responsibilities of clearing the dues / demands etc. of the following institutions, departments and persons and shall keep indemnified the party of the second part or their nominees in that behalf. A) Pay the secured loan of M. S. F. C., Kolhapur presently amounting to Rs.2,09,000/- or which ever dues 5 alongwith the interest thereon that are raised by the M. S. F. C., Kolhapur in that behalf, obtain No dues and discharge Certificate in that behalf. B) Clear and pay, till today, the defaulted installments alongwith the interest and surcharge, if any, in respect of Cash Credit account with the Sharada Sahakari Bank Ltd. under the Consent Terms arrived at and under W.P. No.6411/ 1995 filed in Mumbai High Court, Mumbai. C) Either clear, pay, get waived and obtain No dues letters / certificates – if required – from the persons and departments / institutions mentioned under heads 1) Unsecured Loans, 2) Current Liabilities and 3) Outstanding Payments as mentioned in the Tentative Balance Sheet as on 3.9. 1997 of the said company, prepared and signed by the party of the first part, the copy of which is given for record to the party of the second part. D) Pay, discharge, clear, get waived any claims, demands, compensations etc. that may spring up in future in respect of the period prior to execution of these presents and obtain no dues certificates / letters from such claimants, persons, institutions, departments etc.” 6. Now a perusal of the aforesaid provision that was made in the Memorandum of Understanding would show that the Petitioner and his group had undertaken to clear the dues / demands of institutions, departments and persons specifically named thereafter viz. in Clauses (A), (B), (C ) and (D). Clause (A) related to a loan from M.S.F.C. while clause (B) related to the loan 6 of a named co-operative bank. Under clause ( C) the Petitioner was to obtain a no dues certificate, in respect of the unsecured loans, current liabilities and outstanding payments as mentioned in the tentative balance sheet as on 3rd September, 1997. Similarly, under Clause (D) the Petitioner was to pay, discharge and clear claims, demands and compensation that may arise in future in respect of a period prior to the execution of the Memorandum of Understanding and obtain a no due certificate from such claimants, persons, institutions and departments. The words “such claimants, persons, institutions and departments” would refer to what is contained prior thereto. Clause 3(D) cannot fasten the liability to pay the dues of a workman under Section 33-C(2) upon the Petitioner. All that Clause 3(D) states is that liabilities which may arise in future in respect of a period prior to the date of the Memorandum of Understanding in respect of the named persons, institutions and departments would have to be borne by the Petitioner. This particular liability is not a named liability. In the circumstances, while it would be open to the First Respondent to execute the order under Section 33-C(2) against the employer, no execution would lie as against the Petitioner in his personal capacity. 7 7. The Petition is accordingly allowed to the extent that the Petitioner has been held liable under Section 33-C(2). To that extent, the impugned order of the Labour Court fastening liability upon the Petitioner shall stand quashed and set aside. Since the Petition has been allowed on the aforesaid grounds, Counsel appearing for the Petitioner has not urged any submissions in regard to the merits of the claim under Section 33-C(2) nor has it become necessary for the Court to consider the same. While disposing of the Petition, it is clarified that the First Respondent would be at liberty to take recourse to his remedies for executing the order under Section 33-C(2) against the employer. There shall be no order as to costs. *****