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2015 Supreme(Cal) 539
IN THE HIGH COURT OF CALCUTTA
Jyotirmay Bhattacharya and Tapash Mookherjee, JJ.
The State Trading Corporation of India Ltd. & Anr. - Petitioners
Versus
Shri Alok Kumar Ghosal & Anr. - Respondents
A.P.O No. 322, 327 of 2013, A.P.O No. 350 of 2014, G.A No. 2133, 2954 of 2014 and W.P. No. 881 of 2007
Decided On : 27-04-2015
For the A.K. Ghosal : M. P. Ghosh
For the P & E Corp. of India Ltd. : Raj Ratna Sen, Sourav Kumar Mukherjee and Subir Pal
For the Union of India : L.K. Chatterjee
For the official liquidator : Ruma Sikdar
For the STC of India Ltd. : S. S. Banerjee
Employees of a subsidiary company cannot claim payment of salaries and absorption in the payrolls of the holding company if the subsidiary company is wound up, unless there is a merger or a specific assurance from the holding company to protect their services.
Headnote:
COMPANY LAW - Merger and Subsidiary - Claim for Payment of Salaries and Absorption in Holding Company - Employees of Subsidiary Company - No Merger - Company Wound Up - No Liability on Holding Company - Article 311 of the Constitution of India Not Applicable - Limitation Bar - Writ Petition Dismissed.
Fact of the Case:
Employees of the Tea Trading Corporation of India Limited (TTCIL), a subsidiary of the State Trading Corporation of India Limited (STC), filed a writ petition seeking payment of salaries and absorption in the payrolls of STC or Projects & Equipments Corporation of India Limited (PEC), another subsidiary of STC. TTCIL had become a losing concern and was wound up by the Company Court in 2002.
Finding of the Court:
The court held that there was no merger of TTCIL with either STC or PEC, as claimed by the Central Government in its affidavit. The court found that TTCIL was only made a subsidiary of STC and later of PEC, and that the concept of merger was absent in the instant case.
Issues: 1. Whether the employees of TTCIL were entitled to payment of salaries and absorption in the payrolls of STC or PEC after TTCIL was wound up. 2. Whether the Central Government was liable to pay the dues of the employees and absorb one of them in the payrolls of STC or PEC. 3. Whether the writ petition was barred by limitation.
Ratio Decidendi: 1. The court held that the employees of TTCIL could not claim payment of salaries and absorption in the payrolls of STC or PEC as TTCIL was only a subsidiary of these companies and not merged with them. 2. The court held that the Central Government was not liable to pay the dues of the employees or absorb one of them in the payrolls of STC or PEC as no assurance was given to the employees that their services would be protected even if the company went into liquidation. 3. The court held that the writ petition was barred by limitation as the cause of action arose in June 1997 when the employees were not paid, but the writ petition was filed in 2007.
Final Decision: The writ petition was dismissed, and the appeals filed by the respondents were allowed. The cross-objection filed by the writ petitioner was also dismissed.
Jyotirmay Bhattacharya, J.
Three appeals were filed by three different respondents challenging the order passed by the learned Single Judge of this Court on 14th May, 2013 in W.P. No.881 of 2007.
2. The appeal which was filed by the State Trading Corporation of India Limited and Another was registered as A.P.O No.322 of 2013. The appeal which was filed by the Projects & Equipments Corporation of India Limited and Another was registered as A.P.O No.327 of 2013. The other appeal which was filed by the Union of India was registered as A.P.O No.350 of 2014. A cross-objection has also been filed by the writ petitioner in connection with those appeals by challenging the self-same order passed by the learned Single Judge of this Court as mentioned above. Since all these appeals and the cross-objection arise out of a common judgment passed by a learned Single Judge of this Court in the writ petition, we heard all these three appeals and the cross-objection simultaneously and proposed to dispose of those appeals and the cross-objection by a common judgment.
3. Let us narrate the brief facts of the case leading to filing of the writ petition and ultimately these appeals and the cross-objection. The writ petitioners were employees under the Tea Trading Corporation of India Limited which was established as a Government of India Enterprise under the Ministry of Commerce and Industry. The said company is hereinafter referred to as TTCIL. The State Trading Corporation of India Limited is another Government company under the Ministry of Commerce and Industry. The Projects & Equipments Corporation of India Limited is another Government Company under the Ministry of Commerce and Industry. The State Trading Corporation of India Limited is hereinafter referred to as "STC" and the Projects & Equipments Corporation of India Limited is hereinafter referred to as "PEC".
4. TTCIL, wherein the petitioners were employed, became a losing concern as it had accumulated losses of Rs.12.95 crores as on 31st March, 1985. With a view to revive the said company, the Government of India through its Ministry of Industry and Commerce, New Delhi took various measures so that the employment of the then existing employees of TTCIL could be protected on the existing terms and conditions of their services. On 21st November, 1985 the Government had approved the conversion of TTCIL into a subsidiary of STC on certain terms and conditions. Thus, TTCIL was made a subsidiary of STC by transfer of shares held by the Government in favour of STC for a token consideration of Re. 1/-. The Board of Directors of TTCIL, as a subsidiary of STC, comprises of Chief Executive and three functional Directors in addition to five part-time Directors from STC, Tea Board and Ministry of Commerce. Though certain measures were taken by STC, the holding company, for revival of the subsidiary company TTCIL but ultimately the subsidiary company could not be revived. The salaries and wages of the employees of the TTCIL were paid by STC in a most irregular manner from August, 1996 to May 1997 and since June 1997 no payment was made to the employees of TTCIL either on account of salary and/or wages and/or on account of any other perks.
5. Though by the letters written by the Department of Ministry and Commerce dated 21st November, 1985 and 6th August, 1996 assurance was given by the Ministry of Commerce and Industry that the holding company will protect the employment of the existing employees of TTCIL and will also ensure regular payment of wages/salaries of the TTCIL staff but the holding company failed to fulfil its obligation in this regard. Despite assurance was given by the Ministry of State for Commerce by its letter dated 5th June, 1997 that one month's salary will be immediately disbursed to the staff at Head Office of TTCIL by STC but no such payment was ultimately made.
6. Finding it difficult to revive the said company, namely, TTCIL, a resolution was adopted in a meeting held in the
