T. Dulip Singh vs State of Tamil Nadu

V. Kanagaraj, J.—Petitioner has filed this writ petition praying for the issue of a writ of certiorari calling for the records relating to G.O.(D)

NO.972, Labour and Employment(A2) Department dated 28.10.99 on the file of the first respondent and quash the same.

The facts and circumstances as traced from the affidavit filed in support of the writ petition, would reveal that the Grandoe International

Corporation was a reputed company under the laws of U.S.A.and has been carrying on business in the manufacture of leather goods; that by way

of expansion, Grandoe International Corporation set up a plant in India for manufacture of leather gloves, namely Grandoe India (P) Ltd; that the

entire share capital of Grandoe India was subscribed by Grandoe International Limited; that the main object was (i) to carry on the business of

manufacturing and selling of leather gloves, garments and articles made out of leather (ii) to buy, sell, import, export trade, process convert design

and deal in leather and leather products; that the petitioner was appointed as an Alternate Director of Grandoe India Limited and he was not

involved with any day-to-day management or the affairs of the company; that he was not an Executive Director nor connected with the

management of the company; that he resigned from the post of Director on 4.10.1998; that the demand for leather gloves had been severely

affected during the year 1997-98 which resulted in the company''s operation in India not viable; that this has further aggravated due to labour

problems that therefore, Grandoe International Limited has also stopped funds which resulted in severe financial crunch; that under these

circumstances, a General Meeting was held on 6.11.98 and special resolution was passed therein to go for voluntary winding up of the company;

that accordingly a petition u/s 433 r/w 484 of the companies Act was filed before this Court and the same is pending; that the company is

therefore, no longer in existence and so the company need not seek permission of the Government when it is going to be wound up; that in these

circumstances, the question of violation of Sec.25O of the Industrial Disputes Act, 1947 does not arise at all; and that therefore, the impugned

order to prosecute the petitioner, a former director, for the alleged violation of Sec.25O of the Industrial Disputes Act is untenable and liable to be

set aside; that since the petitioner was not a Director at that time when the decision to wind up the company was taken, no prosecution could be

initiated against him; that therefore, the impugned order purporting to prosecute the petitioner is liable to be set aside and hence, the petitioner has

filed the above writ petition.

Today, when the matter was taken up for consideration in the presence of the learned counsel for both, learned senior counsel appearing on

behalf of the petitioner would submit that a petition to wind up the company u/s 433 read with 484 of the Companies Act 1956 was filed in

C.P.No. 335 of 1999 and the same was still pending. The Government has issued G.O. (D) NO.972, dated 28-10-99 to prosecute the petitioner

company for closing the factory without obtaining prior permission from the Government. But according to the Companies Act 1956, the winding

up commences as soon as the resolution is passed and it is therefore, clear that the company need not seek permission of the Government when it

is going to be wound up. Hence, the question of violation of Section 25O of the Industrial Disputes Act, 1947 does not at all arise. He would

further submit that the petitioner has resigned his post on 4-10-98 itself and therefore, at the relevant time he was neither an Executive Director of

the company nor connected with the management. Hence, the impugned order purporting to prosecute the petitioner is liable to be quashed.

No counter has been filed on behalf of the Government, the first respondent in the above writ petition. But the learned Additional Government

Pleader would argue the matter on instructions.

During arguments, the learned Senior Counsel appearing on behalf of the petitioner would point out that three dates are relevant; that the

petitioner as the Director of the Public Limited Company resigned on 1.9.98; that on 6.11.1998 in accordance with the provisions of the

companies Rules, he filed the petition before the Registrar of Companies; that during December 1998 winding up petition in CP No. 335 of 1999

has been filed to wind up the company u/s 433 r/w 484 of the Companies Act 1956 and the same was still pending; that in the meanwhile, the

Government issued the impugned Government Order dated 28.10.1999 thus initiating proceedings against the petitioner for violation of Section

25O of the Industrial Disputes Act.

Learned Senior Counsel continuing to argue that on 6.11.1998 a decision was taken by the Board u/s 433 of the Companies Act; that u/s 484

of the Companies Act CP No. 335 of 1999 was filed for winding up the company on which order has been passed on 13.7.2001 winding up the

company; that u/s 441(1) of the Companies Act winding up is deemed to have commenced at the time of passing of the resolution itself; that the

offence alleged is closing the industrial establishment without obtaining prior permission from the Government u/s 25O of the Industrial Disputes

Act 1947; that in the case in hand, the entire company Grandoe India Limited is wound up and consequently the only undertaking to carry on the

business was also closed; that the petitioner was appointed in the place of somebody else as the legal Director and an alternative director. At this

juncture, the learned senior counsel would cite the judgment reported in S.B. SHANKAR - Vs. - M/s. AMMAN STEEL CORPORATION,

TIRUCHIRAPALLI REP. BY POWER OF ATTORNEY HOLDER R.M. RAVICHANDRAN ( 2002(1) CTC 227) wherein it is held that:-

The learned counsel for the petitioner contended that the petitioner herein resigned on 4.10.1999 itself as evidenced by the public documents

produced and the resignation took effect from the date of resignation letter and in this regard, he relied on the judgments of this Court in V.K.

Lakshmana Mudaliar and Another Vs. Emperor, . P.R.M. Abdul Huq Vs. Katpadi Industries Ltd. and Another, : AIR1960Mad482 AND

MURARI V. REGISTRAR OF COMPANY, 1975 T.L.N.J. 287. This Court in the above decisions held that the Director, who has resigned, will

be deemed to have resigned from the date of his resignation. Ratnavel Pandian, J (as his Lordship then was) in T.L.N.J.11, has reiterated the

position of law and the relevant portion is extracted below.

... For the above stated reasons and in the absence of any provision either in the Act or in the memorandum of Articles, I am of the view that the

Director who had submitted his resignation would be deemed to have resigned from his office from the date of the submission of his resignation,

when his intention is unequivocally expressed either orally or by a letter. A Fortiori in the instant case, the petitioner by his letter dated 4.12.1972

has tendered his letter of resignation, resigning his directorship from the evening of 4.12.1972 and the said letter has been acknowledged by the

first respondent, the Registrar of Companies and therefore I hold that the resignation had taken effect from 4.12.1972 and consequently the

petitioner has ceased to hold the office from the evening of 4.12.1972.

The learned senior counsel would ultimately pray to grant the relief as prayed for in the writ petition.

On the other hand, the leaned Government Advocate appearing on behalf of the first respondent citing the very impugned order passed by the

Government of Tamil Nadu would exhort that only based on the report of the Labour Commissioner, prosecution was initiated against the

company Director/the petitioner herein and it is a statutorily instituted prosecution against the petitioner under the relevant provisions of the

Industrial Disputes Act and since the commission of offence is definite in closing the industrial establishment without obtaining mandatory

permission from the Government, definite offence is committed by the petitioner and therefore, would pray to dismiss the writ petition with costs.

In consideration of the facts and circumstances encircling the whole affair concerned with the writ petition connecting the impugned G.O., having

regard to the materials placed on record and upon hearing the learned counsel for both, what comes to be known is that it is by G.O. (D) No.

972, dated 28.10.1999 of the Labour and Employment (A2) Department of the Government of Tamil Nadu which is based on the letter of the

Commissioner of Labour in No. C3/53665/99, dt. 30.9.99 issued to prosecute the management for commission of offence u/s 25O and

punishable u/s 25R of the Industrial Disputes Act, 1947, on account of non obtaining prior permission as contemplated u/s 25O of the Industrial

Disputes Act 1947, prior to closing the management Grandoe India Limited, MEPZ, Tamparam, the petitioner being the Director at the time of

alleged closure of the said industrial establishment without prior permission from the Government as contemplated by law, he is directed to be

prosecuted for offence punishable u/s 25R of the Act.

Since it is violation of 25 (O) of the Act, on account of which the management particularly the petitioner being the Director of the management is

sought to be prosecuted and punished as per Section 25R of the Industrial Disputes Act, it is relevant to extract both the sections here.

25O Procedure for closing down an undertaking:-

(i) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed

manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate

Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application, shall also be served

simultaneously on the representatives of the workmen in the prescribed manner.

Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for

other construction work.

(2) Where an application for permission has been made under sub Section (i), the appropriate Government, after making such enquiry as it thinks

fit and after giving a reasonable opportunity of being heard to the employer, the workmen and the persons interested in such closure may, having

regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by

order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the

employer and the workmen.

(3) Where an application has been made under sub section (1) and the appropriate Government does not communicate the order granting or

refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied

for shall be deemed to have been granted on the expiration of the said period of sixty days.

(4) An order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub section (5) be final and

binding on all the parties and shall remain in force for one year from the date of such order.

(5) The appropriate Government may, either on its own motion or on the application made by the employer or any work man, review its order

granting or refusing to grant permission under sub section (2) or refer the matter to a Tribunal for adjudication.

Provided that where a reference has been made to a Tribunal under this sub section, it shall pass an award with a period of thirty days from the

date of such reference.

(6) where no application for permission under sub section (1) is made, within the period specified therein, or where the permission for closure has

been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workman shall be entitled to all the

benefits under any law for the time being in force as if the undertaking had not been closed down.

(7) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owning to

such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the

provisions of sub section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.

(8) Where an undertaking is permitted to be closed down under sub section (2) or where permission for closure is deemed to be granted under

sub section (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section,

shall be entitled to receive compensation which shall be equivalent to fifteen days'' average pay for every completed year of continuous service or

any part thereof in excess of six months.

25 (R) Penalty for closure:-(1) Any employer who closes down an undertaking without complying with the provisions of sub section (1) of Section

25O shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or

with both.

(2) Any employer who contravenes (an order refusing to grant permission to close down an undertaking under sub section (2) of Section 25O or a

direction given u/s 25P), shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five

thousand rupees, or with both, and where the contravention is a continuing one, with a further fine which may extend to two thousand rupees for

every day during which the contravention continues after the conviction.

Learned senior counsel for the petitioner would further submit that as early as on 1.9.1998 itself, the petitioner has sent his resignation, as an

Alternate Director of the Company on health conditions and urged to accept the same with immediate effect, to the Chairman, Grandoe India

Limited, MEPZ, Tambaram. It is further seen that on the part of the management, the Company''s Minutes and Form No.23 of the Companies Act

1956 had been submitted before the authorities concerned for winding up. A special resolution was also passed in the share holders meeting and

the same was submitted along with Form No.32 to the Registrar of Companies on 6.11.1998. From the said Form No.32, it comes to be seen

that the name of the petitioner Thomas Dulip Singh, S/o Late Thomas, No.3, 15th Avenue, Harrington Road, Chetpet, Chennai 31 is mentioned;

that the date of appointment or change were shown as 10.10.1998 and in the last column meant for brief particulars of changes it is stated

resigned from the Board"". These are all the documents which have been filed by the Company and therefore, it is clear that in pursuance of the

resignation letter submitted on the part of the petitioner on 1.9.1998, his resignation had been accepted by the company and that the Company as

per Form No.23 had issued notice only on 3.10.1998 and passed the resolution on 4.11.1998 placing the same in the meeting of the shareholders

and the decision had been taken to wind up the same u/s 433 of the Companies Act thus passing a special resolution to the said effect and since all

these papers along with Form No.32 were submitted before the concerned authorities on 6.11.1998 wherein it has been clearly mentioned in the

necessary column for appointment and changes among Directors that the petitioner had resigned from the Board and therefore, no doubt need be

entertained that on the date of passing of the special resolution i.e. on 4.11.1998 to wind up the company in accordance with Section 433 of the

Companies Act, the petitioner was neither a Director nor was holding any position since he had resigned as early as on 1.9.1998 as it comes to be

seen from the materials placed on record. Therefore, this Court could only arrive at the decision that the petitioner was neither party to the special

resolution to wind up the company nor had he been holding any responsible position much less as the Director of the company which was wound

up and which is the subject matter of the above proceedings. Therefore, it is hereby held that the petitioner is not in any manner liable to be either

prosecuted for violation of Section 25O or could he be punished u/s 25O of the Industrial Disputes Act, 1947.

However, though generally the offence is alleged to have been committed on the part of ''the management Grandoe India Limited'' and its ex-

directors as per the G.O. impugned herein, still the petitioner, who is alleged to have been one of the Directors at the time of closure of the

establishment has alone come forward with the above writ petition praying to issue a Writ of Certiorari and quash the G.O. impugned as a whole.

Since the above writ petition seeks to quash the entire G.O.No.972, dated 28.10.1999 morefully described herein as above, which not only

includes the management viz., M/s. grandoe India Limited, MEPZ, Tambaram, Chennai.45 but also specifically makes a mention of four others

except the petitioner as the offenders out of whom only the petitioner is able prove his innocence and none else. Therefore, it is further held that

neither the company that is alleged to have been wound up without obtaining necessary prior permission from the Government nor the other three

Directors mentioned in the G.O. impugned they being neither parties to the writ petition nor any order has been sought for quashing the impugned

G.O. against them and therefore, so far as they are concerned, this writ petition has no relevance at all. Even the petitioner''s case is that he was

alone, not the Director at the time of passing of the resolution to wind up the company and none else. Therefore, the writ petition could be allowed

only so far as it is concerned with the petitioner and not against either the management or the other three Directors mentioned in the G.O.

In result:

(i) The above writ petition is partly allowed so far as it is concerned only with the petitioner viz., Thomas Dulip Singh quashing the G.O. (D)

No.972 L&E(A2) dated 28.10.1999 in so far as the same is concerned with the petitioner and none else.

(ii) It is clarified that regarding others such as the management Grandoe India Limited and other three Directors mentioned in the G.O. no order is

passed herein and the said G.O. stands good so far as it is concerned with them.

(iii) No costs.

(iv) Consequently, WPMP No. 7650 of 2000 is closed.