The main legal point established in the judgment is that the closure of an industrial undertaking is governed by the provisions of the Industrial Disputes Act, 1947, and the workmen are entitled to receive compensation as provided for in the Act.

JUDGMENT :

S.B. Sinha, J.

Leave granted.

2. These appeals are directed against judgments and orders dated 22-6-2005 and 19-7-2006 passed by a Division Bench of the Karnataka High Court whereby and whereunder the judgment and order dated 7-2-2005 passed by a Learned Single Judge of the said High Court dismissing writ petition Nos. 1651-1685 of 2005 filed by the respondents herein claiming their absorption in the appellant-Corporation.

3. Indisputably the private-respondents herein were the workmen of Karnataka Pulpwood Limited (the company). It was a Government Company. It was running at a loss. Karnataka Pulpwood Limited is a joint sector company of Karnataka Forest Development Corporation Limited and Karnataka Harihar Polyfibres Limited the share capital was fixed in the ratio of 51:49.

4. The Government stood as a guarantor in respect of the loans to be raised by the joint sector company from the commercial Banks. A lease was granted in favour of the said company. Karnataka Pulpwood Limited which is said to be a subsidiary of the appellant-corporation faced hostility from the local people for various reasons. A public interest litigation was also filed before this Court against lease of forest lands, inter alia, on the ground that the same was violative of the provisions of the Forest (Conservation) Act, 1980. This Court granted an order of stay regarding possession of the said leasehold property. Protracted legal battle adversely affected the commercial viability of KPL Project. Great difficulty was also experienced in the matter to of obtaining loans from banks for raising of maintenance of plantations.

A question, therefore, arose as to whether the said company should be would up. By reason of a decision taken by the State of Karnataka on or about 24-10-1991, it was, inter alia, directed:

"(a) To wind-up Karnataka Pulpwood Limited a Joint Sector Company. The company is directed to take steps in this connection following prescribed procedure under Companies Act, 1956.

(b) That all the Limited Assets and Liabilities of the Karnataka Pulpwood Limited and any guarantee given by the Government to Karnataka Pulpwood Limited for raising loans are transferred to Karnataka Forest Development Corporation Limited.

(c) Karnataka Forest Development Corporation is directed to settle obligations contained in promoters an agreement amicably through the dialogue between the promoters or in terms of arbitration clause in case of any dispute between the parties.

(d) Karnataka Forest Development Corporation is directed to absorb the staff of Karnataka Pulpwood Limited in Karnataka Forest Development Corporation.

(e) To return the enquiry to M/s Harihar Polyfibres Limited. The question regarding payment of interest on equity has to be negotiated and settled between the promoters viz., Karnataka Forest Development Corporation and M/s Harihar Polyfibres."

5. An attempt was made to wind up the said industrial undertaking in terms of the provisions of the Companies Act. On or about 16-11-1993, the State accorded its approval for merger of the said company with the appellant herein in place of closure of the former. It is, however, not known as to whether formalities required to be complied with for merger of the said companies under the Companies Act were undertaken or not. Apparently, such an exercise was undertaken. A proposal was also mooted that a voluntary retirement scheme be floated in regard to the employees of the company and in its meeting held on 27-1-2003, it was resolved:

"The matter was also discussed in the meeting of the High Power Committee on Public Sector Undertakings under the chairmanship of the Chief Secretary on 20-1-1993. It was pointed out that in the HPC a decision has been taken to close the KPL revising the earlier decision of merger with KFDC."

6. Yet again, a Government order was issued on 2-1-2004 directing:

"1. Close down KPL.

2. Extend financial help to KPL in order to extend VRS to all its employees. Those employees who do not o