judgement:
minal Appeal No. 165 of 1971.
Appeal by special leave from the _judgment and order dated November 24, 1970 of the Madras High Court in Criminal Appeal No. 761 of 1970 and Referred Trial No. 50, of 1970.
section Lakshminarasu, for the appellant.
A. V. Rangam, for the respondent.
623 The Judgment of the Court was delivered by Khanna, J.
Thulia Kali (26) was convicted by Sessions Judge Salem under section 302 Indian Penal Code for causing the death of Madhandi Pidariammal (40) and under section 379 Indian Penal Code for committing theft of the ornaments of Madhandi deceased.
The accused was sentenced to death on the former count.
No separate sentence was awarded for the offence under section 379 Indian Penal Code.
The High Court of Madras affirmed the conviction and.
sentence of the accused.
The accused has now come up in appeal to, this Court by special leave.
The prosecution case was that Madhandi deceased purchased land measuring 1 acre 62 cents from Thooliya Thiruman (PW 5), elder brother of the accused for rupees one, thousand.
The land of the accused adjoined the land sold to Madhandi deceased.
The accused wanted Madhandi deceased to sell that land to him but the deceased declined to do so.
Madhandi constructed a fence around the land purchased by her, as a result of which the passage to the land of the accused was obstructed.
About a week before the present occurrence, the accused removed some jack fruits from the land purchased by the deceased.
Complaint about that was made by the deceased to the Panchayatdars.
The Panchayatdars considered the matter, but the accused declined to abide by the decision of the Panchyatdars.
On March 12, 1970 at about 12 noon, it is stated, Madhandi deceased left her house situated in village Sakkarapatti along with her daughter in law Kopia Chinthamani (PW 2), aged 10, for Valaparathi at a distance of about two miles from the village for grazing cattle.
Shortly thereafter, Valanjiaraju (PW 1), stepson of Madhandi deceased, also went to Valaparathi and started cutting plants at a distance of about 250 feet from the place where the deceased was grazing the cattle.
At about 2 p.m. the accused came to the place where Madhandi deceased was present and asked her whether she would give him the right of passage or not.
The deceased replied in the negative.
The accused then took out knife exhibit 1 and gave a number of knife blows, to the deceased in spite of her entreaties to the accused not to stab her and that she would give him what he wanted.
Kopia PW raised alarm and ran from the place of occurrence.
She met Valanjiaraju PW and told him that the accused was giving knife blows to Madhandi.
Accompanied by Kopia, Valanjiaraju then went towards the accused but he threatened them with knife.
Valanjiaraju and Kopia thereupon went to the village and informed the husband of the deceased as well as a number of other villagers including Aneeba (PW 3) and Selvaraj (PW 4).
Valanjiaraju and a large 624 number of other villagers then went to the place of occurrence A and found the dead body of Madhandi deceased lying there with injuries on her throat, face and other parts of the body.
Both her ears were found to have been chopped off.
Her jewels had been removed.
According further to the prosecution, Valanjiaraju went to B the house of village munsif Muthuswami (PW 8) to inform him about the occurrence.
Muthuswami, however, was away from the house to another village in connection with some collection work.
Muthuswami returned at about 10.30 p.m. and was told by Valanjiaraju about the occurrence.
Muthuswami did not record the statement of Valanjiaraju at that time and told him that be would not go to the spot where the dead body was lying on that night as wild animals would be roaming there and that he would go there on the following morning ' Muthuswami went to the spot where the dead body of the deceased was lying at about 8.30 a.m. on the following day, that is, March 13, 1970 and had a look at the dead body of the deceased.
Statement P. I of Valanjiaraju was recorded by Muthuswami at 9.
a.m. at the spot.
The statement was then sent by Muthuswami to police station Valavanthi at a distance of about two miles from the place of occurrence.
Formal first information report P. 15 on the basis of statement P. I was prepared at the police station at 11.45 a.m. Head Constable Rajamanickam after recording first informa tion report, went to the place of occurrence and reached there at 2.30 p.m. Inspector Rajagopal (PW 13), on hearing about the occurrence at the bus stand, also went to the place of occurrence.
Inquest report relating to the dead body of the deceased was then prepared.
Dr. Sajid Pasha (PW 7) was thereafter sent for from Sendamangalam.
Dr. Pasha arrived at the place of occurrence at 12.30 p.m. on March 14, 1970 and performed post mortem examination on the dead body of Madhandi deceased.
Inspector Rajagopal arrested the accused, according to the prosecution, at 5 a.m. on March 15, 1970 in a reserve forest about one mile from Seppangulam.
The accused then stated that he had kept ornaments and knife in the house of Chakravarthi (PW 9) and would get the same recovered.
The Inspector then went with accused to the house of Chakravarthi PW and from there recovered knife exhibit 1 and ornaments Exs.
2 to 8.
The said ornaments belonged to Madhandi deceased.
The knife was taken into possession and put into a, sealed parcel.
The clothes which the accused was wearing were got removed and put into a sealed parcel.
The parcels were sent to Chemical Examiner, whose report showed that neither the knife nor the clothes of the accused were stained with blood.
625 At the trial the plea of the accused was denial simpliciter.
According to the accused, the villagers came to know on the evening of March 12, 1470 that the deceased had been murdered.
The accused along with the villagers went to the spot where the dead body of the deceased was lying and stayed with them there during the night.
On the following day, the accused was suspected by the villagers.
They gave him beating and tied him to; A tree.
Later on that day, that is, March 13, 1970, the accused was taken to the police station and kept there for two days.
The accused denied having committed the murder of the deceased or having got recovered the ornaments and the knife.
No evidence was produced in defence.
The learned Sessions Judge in convicting the accused relied upon the evidence of Kopia (PW 2), who had given eye witness account of the occurrence, as well as the statement of Valanjiaraju (PW 1), who had been threatened by the accused with knife near the place of occurrence.
Reliance was also placed upon the recovery of knife and ornaments in pursuance of the statement of the accused.
The High Court agreed with the Sessions Judge and affirmed the conviction of the accused.
There can be no doubt that Madhandi deceased was the victim of a 'brutal attack.
Dr. Sajid Pasha, who performed post mortem examination on the dead body of Madhandi, found as many as 29 injuries on the body.
Out of them, 24 were incised wounds and five were multiple abrasions.
There were a number of incised wounds on the face, neck, chest and abdomen.
The pinnas of the right and left ears had been completely severed.
Injuries were also found in the eyes and laryngeal region.
Death was the result of different injuries, some of which were individually sufficient to cause death.
The case of the prosecution was that it was the accused appellant who had caused the injuries to,Madhandi deceased.
The accused has, however, denied this allegation and has claimed that he has been falsely involved in this case on suspicion.
The trial court and the High Court have based the conviction of the accused appellant, as stated earlier, primarily upon the testimony of Kopia (PW 2) and Valanjiaraju (PW 1).
This Court does not normally reappraise evidence in an appeal under article 136 of the Constitution, but that fact would not prevent interference with an order of conviction if on consideration of the vital prosecution evidence in the case, this Court finds it to be afflicted with ex facie infirmity.
There are in ' the present case certain broad features of the prosecution story which create considerable doubt regarding the veracity of the aforesaid evidence, and.
in our opinion, it would not be safe to maintain the conviction 626 on the basis of that evidence.
According to Kopia (PW 2), .the accused stabbed the deceased at about 2 p.m.
Kopia raised alarm and immediately informed Valanjiaraju, who was cutting plants at a distance of about 250 feet from the place of occurrence.
Valanjiaraju and Kopia then, came towards the place where the accused had assaulted the deceased, but the accused threatened them with knife.
Valanjiaraju and Kopia thereupon went to the village abadi and informed the other villagers.
Valanjiaraju accompanied by other villagers then went to the place of occurrence and found the dead body of Madhandi lying there with a number of injuries.
According to document P. I Valanjiaraju made statement .about the occurrence to village munsif Muthuswami (PW 8) at about 9 a.m. on March 13, 1970.
Formal first information report on the basis of the above statement was prepared at the police station at 11.45 a.m.
The delay in lodging the report, according to the prosecution, was due to the fact that Muthuswami PW was away to another village in connection with some collection work and he returned to his house at 10.
30 p.m. Muthuswami told Valanjiaraju when the latter met him at night that he would record the satement only after having a look at the dead body on the following morning.
It is in the evidence of Valanjiaraju that the house of Muthuswami is at a distance of three furlongs from the village of Valanjiaraju.
Police station Valavanthi is also at a distance of three furlongs from the house of Muthuswami.
Assuming that Muthuswami PW was not found at his house till 10.30 p.m. on March 12, 1970 by Valanjiaraju, it is, not clear as to why no report was lodged by Valanjiaraju at the police station.
It is, in our opinion, most difficult to believe that even though the accused had been seen at 2 p.m. committing the murder of Madhandi deceased and a large number of villagers had been told about it soon thereafter, no report about the occurrence could be lodged till the following day.
The police station was less than two miles from the village of Valanjiaraju and Kopia and their failure to make a report to the police till the following day would tend to show that none of them had witnessed the occurrence.
It seems likely, as has been stated on behalf of the accused, that the villagers came, to know of the death of Madhandi deceased on the evening of March 12, 1970.
They did not then know about the actual assailant of the deceased, and on the following day, their suspicion fell on the accused and accordingly they involved him in this case.
First information report in a criminal case is an extremely vital and valuable piece of evidence for the purpose of corroborating the oral evidence adduced at the trial.
The importance of the above report can hardly be overestimated from the 627 standpoint of the accused: The object of insisting upon prompt lodging of the report to the police in respect of commission of an offence is to obtain early information regarding the circumstances in which the crime was committed, the names of the actual culprits and the part played by them as well as names of eye witnesses present at the scene of occurrence.
Delay in lodging the first in formation report quite often results in embellishment which is a creature of afterthought.
On account of delay, the report not only gets bereft of the advantage of spontaneity, danger creeps in of the introduction of coloured version, exaggerated account or concocted story As a result of deliberation and consultation.
It is, therefore, essential that the delay in the lodging of the first information report should be satisfactorily explained.
In the present case, Kopia, daughter in law of Madhandi deceased, according to the prosecution case, was present when the accused made murderous assault on the deceased.
Valanjiaraju, stepson of the deceased, is also alleged to have arrived near the scene of occurrence on being told by Kopia.
Neither of them, nor any other villager, who is stated to have been told about the occurrence by Valanjiaraju and Kopia, made any report at the police station for more than 20 hours after the occurrence, even though the police station is only two miles from the place of occurrence.
The said circumstance, in our opinion, would raise considerable doubt regarding the veracity of the evidence of those two witnesses and point to an infirmity in that evidence as would render it unsafe to base the conviction of the accused appellant upon it.
As regards the alleged recovery of knife and ornaments at the instance of the accused, we find that the evidence consists of statements of Inspector Rajagopal (PW 13), Kati Goundar (PW 6) and Chakravarthi (PW 9).
According to Chakravarthi (PW 9), the accused handed over the ornaments in question to the witness when the accused came to the house of the witness on the evening of March 12, 1970 and passed the night at the house.
The witness also found knife in the bed of the accused after he had left on the following day.
According, however, to Kali Goundar (PW 6), the accused, on interrogation by the Inspector of Police, stated that he had entrusted the ornaments to Thangam, wife of Chakravarthi (PW 9).
Apart from the discrepancy on the point as to whom was the person with whom the accused had kept the ornaments, we find that Thangam, with whom the accused, according to Kali Goundar PW had kept the ornaments, has not been examined as a witness.
In view of the above statement of Kali Goundar, it was, in our opinion, essential for the prosecution to examine Thangam as a witness and its failure to do so would make the Court draw an inference against the prosecution.
in his bed in the house of Chakravarthi (PW 9) when he had ample opportunity to throw away the knife in some lonely place before arriving at the house of Chakravarthi.
The knife in question was found by Chemical Examiner to be not stained with blood and according to the prosecution case, the accused had washed it before leaving it in the bed in the house of Chakravarthi.
If the accused realised the importance of doing away with the blood stains on the knife, it does not seem likely that he would bring that knife ' to the house of Chakravarthi and leave it in the bed.
Looking to all the circumstances, we are of the view that it is not possible to sustain the conviction of the accused on the evidence adduced.
We accordingly accept the appeal, set aside the conviction of the accused appellant and acquit him.
K.B.N. Appeal allowed.

dataset_name: IN-Abs

summary/full:
This Court does not normally reappraise evidence in an appeal under article 136 of the Constitution but that fact would not prevent interference with an order of conviction, if, on consideration of the vital prosecution evidence in the case the Court finds it to be afflicted with ex facie infirmity.
The appellant was sentenced to death under section 302 Indian Penal Code.
The trial Court and the High Court based the conviction of the appellant primarily upon the testimony of two witnesses one of whom according to the prosecution case was present when the accused made murderous assault on the deceased and the other arrived soon after.
Neither of them nor anyone else who was told about the occurrence by the two witnesses made any report at the police station for more than 20 hours after the occurrence even though the police station was only two miles from the place of occurrence.
Setting aside the conviction, HELD : That the delay in lodging the report would raise considerable doubt regarding the varacity of the evidence of two witnesses and point to an infirmity in that evidence and would render it unsafe to base the conviction of the apPellant.
The first information report in a criminal case is an extremely vital and valuable piece of evidence for the purpose of corroborating the oral evidence adduced a ' the trial The object of insisting upon prompt lodging of the report to the police in respect of commission of an offence is to obtain early information regarding the circumstances in which the crime was committed, the names of the actual culprits and the part played by them as well as, the names of eye witnesses present at there scene of occurrence.
Delay in lodging the first information report quite often results in embellishment which is a Creature of after thought.
It is therefore essential that the delay in lodging the report should be satisfactorily explained.
[626 H]


judgement:
Appeal No. 1339 of 1967.
Appeal by special leave from the Award dated April 28, 1967 ' of the Central Government Labour Court, Bombay in Application No. LCB 39 of 1965.
608 section D. Vimdalal, section K. Wadia, D. N. Mishra and O. C. Mathur , for the appellant.
K. P. V. Menon, section R. Iyer and M. section Narasimhan, for respon dent No. 1.
The Judgment of the Court was delivered by Dua, J.
This.
is an appeal by special leave and the appellant, the Air India Corporation, Bombay assails Part I of the Award 'with corrigendum, dated April 28, 1967, given by the Central Government Labour Court, Bombay, on the complaint dated October 16, 1965 made by Shri V. A. Rebellow, respondent No. 1 in this Court (hereinafter referred to as the complainant) under section 33 A of the Industrial Disputes Act, 1947_hereinafter called the Act).
The complaint was originally filed by the complainant before the National Industrial Tribunal, Delhi, (Mr. Justice G. D. Khosla, retired Chief Justice of the Punjab High Court) in the Industrial Dispute Reference No. 1 of 1964 but was later transferred to the Central Government Labour Court and numbered as application No. LCB 39 of 1965.
The impugned award merely dealt with the preliminary points .raised by the appellant that the complainant was not a workman concerned in the aforesaid industrial dispute and that there was no breach of section 33 of the Act with the result that the complaint under section 33 A of the Act was incompetent.
The Labour Court held the complainant to be,, a workman concerned in the aforesaid industrial dispute pending before the National Industrial Tribunal on the date of his dismissal and that the dismissal was not a discharge simpliciter but in breach of the provisions of section 33.
On this finding his complaint was held to be maintainable.
The two questions canvassed in the present appeal are (1) whether the complainant was a workman and was as such concerned in the aforesaid dispute (Industrial Dispute Reference No. 1 of 1964) and (2) whether the termination of his service was a dismissal as alleged by him or was a mere termination of service not amounting to dismissal.
Broad facts necessary for understanding the controversy may now be stated: The order which was challenged as amounting to the com plainant 's dismissal reads CONFIDENTIAL Dated June 19, 1965 (Thru : The Commercial Manager, Cargo) Dear sir, It has been decided to terminate your services, which we hereby do with immediate effect.
You will be paid ,one month 's salary in lieu of notice.
609 2.
Please arrange to return, as early as possible, all items of Corporation 's property in your possession to enable us to settle your accounts.
Your accounts will be settled after checking your commitments.
Yours faithfully, AIR INDIA Sd/ section K. KOOKA Commercial Director" On July, 16, 1965 the complainant acknowledged the above letter terminating his services with immediate effect and requested for reinstatement because according to him there was nothing to warrant such summary termination of his services.
This is what he wrote : ".
In this connection I have to state that I have served the Corporation for a period of over nine years and to the date of terminating my services, there is nothing on record which warrants that my services should be terminated summarily.
Hence it is requested that I be reinstated and thereafter if the Management is of the opinion that I have done something against the interest and the fair name of the Corporation, I be charged accordingly, given an opportunity to explain my conduct and after everything else if I am found guilty, action taken against me as the management deems fit.
With the experience I have with the management 's policy towards, its employees, I am confident that I will never 'be deprived of the opportunity I have asked for and more so in the light of the faithful service I have rendered. . " The following reply was sent to the complainant on September 8.1965 2. 1 have to inform you that your services were terminated on payment of 30 days ' salary in lieu of notice, in accordance with Rule 48 of the Air India Employees 'Service Regulations.
" 610 Regulation 48 of the Air India Employees ' Service Regulations which was described as Rule 48 in the letter of September 8, 1965 leads as under CHAPTER VIII Cessation of service 48.
Termination : The service of an employee may be terminated without assigning any reason, as under : (a) of a permanent employee by giving him 30 days ' notice in writing or pay in lieu of notice; (b) of an employee on probation by giving him 7 days ' notice in writing or any in lieu of notice; (c) of a temporary employee by giving him 24 hours ' notice in writing or pay in lieu of notice.
Explanation : For the purposes of this Regulation, the word "pay" ' shall include all emoluments which would be admissible if he were on privilege leave." In the complaint under section 33 A of the Act it was alleged by the complainant that the order dated June 19, 1965 smacked of vindictiveness or unfair labour practice and that his alleged termination was a cloak for punishing him.
No facts were, however, stated in support of this averment.
According to the averments in this complaint, Regulation 48 postulates the existence of some reason for the termination of service and since the Corporation had not disclosed any reason for the termination of the complainant 's service it was requested that the Corporation be directed to disclose the reason, if any, for the termination of his service.
The real grievance of the complainant, it appears, was founded on the construction of Regulation 48 as is clear from the following averments in para 7 of the complaint: "The complainant submits that on a reasonable construction of the said Rule, the Opposite Party is bound to disclose the reason if any for the said termination in the present proceedings.
The complainant submits that any other construction would be unreasonable and make the said rule itself unreasonable, illegal, void as also in contravention of Articles 14, 16, 19 and 311 of the Consti tution of India and is therefore void and inoperative." In regard to the question of the complainant being a workman concerned in a pending industrial dispute it was averred that the 611 complainant had been employed by the Opposite Party as an Assistant Station Superintendent (Crew Scheduling) in the grade of Rs. 300 25 500 50 650 and was confirmed in that post with effect from 1st December, 1963.
In para 8 of the complaint it was pleaded that : "the proceedings in reference No. NIT No. 1 of 1964 were and are pending before this Hon 'ble Tribunal and the Complainant is a workman concerned in the said dispute.
The Complainant says that under the circumstances aforsaid the Opposite Party ought to have made an application for approval before this Hon 'ble Tribunal under Section 3 3 (2) of the , 1 947 but the Opposite Party has made no such application nor has the Opposite Party intimated that it proposed to make such an application for approval while terminating the services of the Complainant.
The Complainant says.
that the Opposite Party has not obtained the approval of this Hon 'ble Tribunal in writing of the action taken by it against the Complainant.
" On these averments reinstatement was claimed by the complainant with full back wages and allowances from the date of the alleged termination of his services.
It appears that pursuant to directions from the Labour Court the appellant filed a further written statement dated June 30, 1966 and it was submitted : "Without prejudice to the contention of the Opposite Party that this case should be decided on the preliminary points above as raised by the Opposite Party, as the Complainant has repeatedly made a grievance that a written statement on merits has not even been filed and as this Honourable Tribunal also indicated at the preliminary hearing that a written statement on merits should in any event be kept ready and that no further time would be given to the opposite Party for preparing and filing the same , the Opposite Party herewith begs to submit this further written Statement.
" With these; preliminary submissions it was stated as follows in paragraph 7 : "With reference to, paragraphs 6 and 7 of the Complaint, Regulation 48 of the Air India Employees ' Service Regulations provides inter alia, that the services of a permanent employee may be terminated, without assigning any reason, by giving him thirty days ' notice in writing or pay in lieu of notice.
The construction 612 sought to be put upon the said Regulation by the Complainant is not correct.
The opposite Party denies that Regulation 48 is unreasonable, illegal or void or in con travention of Articles 14, 16, 19 and 311 of the Constitution of India.
The said Regulations have been framed with the previous approval of the Central Government under section 45 (2)(b) of the Air Corporation Act, 1953.
The Opposite Party submits that it was and is not bound to give or disclose any reason for terminating the service of the Complainant.
Any contrary view would, it is submitted, render the said Regulation No. 48 completely nugatory.
However, without prejudice to this, the Opposite Party says that the Complainant 's service was terminated because of the total loss of confidence on account of grave, suspicions regarding his private conduct and behaviour with Air Hostesses of the Corporation.
The reports and statements from the Air Hostesses concerned cannot be disclosed as they involve the reputation and future of young and unmarried girls.
Having regard to this, the Opposite Party could not continue the Complainant in its service and it was constrained to terminate his service in accordance with Regulation 48.
" The complainant 's averment that he was a workman concerned in the proceedings in the industrial dispute was denied by the appellant in the first written statement dated March 15, 1966 in para I which reads : "(a) The Complainant was at no relevant time a 'workman ' within the meaning of that term as defined in Section 2(s) of the said Act.
At the time of the termination of his service, the Complainant was an Assistant Station.
Superintendent and was employed in an adminis trative,/Supervisory capacity, drawing a total salary amounting to Rs. 690 per month.
Moreover, it may also be pointed out that in its Staff Notice No. 130 dated 31st March, 1956, the Opposite Party has given a classi fication of its personnel, wherein the category of Assistant Station Superintendents has been classified as an "Officer" category (vide Entry No. 1/28).
A copy of the said Staff Notice is hereto annexed and marked exhibit No. 1.
Further, the said category of A ssistant Superintendents has not been included among the categories of workman in the ' dispute in Ref.
No. NIT/1 of 1964 pending before the, National Industrial Tribunal composed of Shri G. D. Khosla.
Besides, the Class of officers designated as Assistant Station Superintendents has always been, and is, represented by the Air India Officers 613 Association which is not an association representing any workmen ' and which is not a party to the dispute in the above mentioned reference.
Further, the said class of Officers has not at any time presented itself before the National Industrial Tribunal nor has, it been represented at the hearing of the said dispute by any of the Unions representing parties nos.
2 to 7 to the said dispute.
(b) Even assuming, without admitting, that the Complainant is held to be a workman (which is denied) sub sections `1 and 2 of section 33, and consequently section 33A, have, and can have, no application having regard to the circumstances of the present case.
The sub ject matter of the Complaint is not a matter connected with the dispute in the Reference before the National Industrial Tribunal nor is the Complainant concerned in the said dispute.
Further subsection (1) (b) and subsection 2(b) of section 33 have application only in the case of dismissal or discharge for misconduct in the circumstances set out therein, and not to a case of termination of service simpliciter.
In the present case, the Opposite Party has bona fide terminated the service of the Complainant under the provisions of Regulation 48 of Air India Employees ' Service Regulations which are applicable to the Complainant.
There has, therefore, been no breach of the provisions of sub section (1)(b) or sub section 2(b) of section 33 and unless there is such a breach there can be no invocation of Section 33A.
On the contrary, the Opposite 'Party repeats that the said sub sections are inapplicable.
" The complainant and the appellant both filed lists of the complainant 's duties in proof of their respective contentions, exhibit E 1 being the appellant 's list and exhibit W 13, the complainant 'section The Labour Court held in the impugned award that the com plainant as Assistant Station Superintendent was a Junior Officer and as such, as determined in the Khosla Tribunal Award, was a workman concerned in the industrial dispute before that Tribunal and that his discharge was not discharge simpliciter but in breach of section 33 of the Act.
On this view the complaint was directed to be considered on the merits.
In this Court Shri Vimadlal argued that keeping in view the complainant 's duties it is not possible to hold that he is a workman.
According to the submission the complainant was an officer whose duties were primarily supervisory and, therefore, he could not be described as a workman.
The complainant, it was further argued, was at least not a workman concerned in the industrial 11 L1031S sup.
CI/72 614 dispute pending before the Khosla Tribunal.
In any event, the action taken by the appellant, not being for misconduct on the part of the appellant but under Regulation 48 was not hit by section 33 of the Act.
We should like first to deal with the applicability of sections 33 and 33A of the Act on the assumption that the complainant was a workman and also as such interested in a pending industrial dispute.
These sections read : "33.
Conditions of service etc., to remain unchanged under certain circumstances during pendency of proceedings: (1) During the pendency of any conciliation proceeding before a concilation officer or a Board or of any proceeding before an arbitrator or a Labour Court or Tribunal or National Tribunal in respect of an industrial dispute, no employer shall, (a) in regard to any matter connected with the dispute, alter, to the prejudice of the workmen concerned in such dispute, the conditions of service applicable to them immediately before the commencement of such proceeding; or (b) for any misconduct connected with the dispute, discharge or punish, whether by dismissal or otherwise, any workmen concerned in such dispute, save with the express permission in writing of the authority before which the proceeding is pending.
(2) During the pendency of any such proceeding in respect of an industrial dispute, the employer may, in accordance with the standing orders applicable to a workman concerned in such dispute, or, where there are no such standing orders, in accordance with the terms of the contract, whether express or implied, between him and the workman, (a) alter, in regard to any matter not connected with the dispute, the conditions of service applicable to that workman immediately before the commencement of such proceeding; or (b) for any misconduct not connected with the dispute, discharge or punish, whether by dismissal or otherwise, that workman Provided that no such workman shall be discharged or dismissed, unless he has 'been paid wages for owner 615 month and an application has been made by the employer to the authority before which the proceeding is pending for approval of the action taken by the employer.
(3) Notwithstanding anything contained in sub section (2)no employer shall, during the pendency of any such proceeding in respect of an industrial dispute,take any action against any protected workman concerned in such dispute (a) by altering, to the prejudice of such protected workman, the conditions of service applicable to him immediately before the commencement of such proceedings; or (b) by discharging or punishing, whether by dismissal or otherwise, such protected workman, save with the express permission in writing of the authority before which the proceeding is pending.
Explanation.
For the purposes of this sub section, a 'protected workman ', in relation to an establishment, means a workman who, being an officer of a registered trade union connected with the establishment, is recog nised as such in accordance with rules made in this behalf.
(4) In every establishment, the number of workmen to be recognised as protected Workmen for the purposes of sub section (3) shall be one per cent.
of the total number of workmen employed therein subject to a minimum number of five protected workmen and a maximum number of one hundred protected workmen and for the aforesaid purpose, the appropriate Government may make rules providing for the distribution of such protected workmen among various trade unions, if any, connected with the establishment and the manner in which the workmen may be chosen and recognised as protected workmen.
(5) Where an employer makes an application to a conciliation officer, Board, an arbitrator, a Labour Court, Tribunal or National Tribunal under the proviso to sub section (2) for approval of the action taken by him, the authority concerned shall, without delay, hear such application and pass, as expeditiously as possible such order in relation thereto as it deemed fit.
616 33A Special provision for adjudication as to whether conditions of service, etc., changed during pendency or proceedings : Where an employer contravenes the provisions of section 33 during the pendency of proceedings before a Labour Court, Tribunal or National Tribunal, any employee aggrieved by such contravention, may make a complaint in writing, in the prescribed manner to such Labour Court, Tribunal or National Tribunal and on receipt of such complaint that Labour Court, Tribunal or National Tribunal shall adjudicate upon the complaint as if it were, a dispute referred to or pending before it, in accordance with the provisions of this Act and shall submit its award to the appropriate Government and the provisions of this Act shall apply accordingly.
" The basic object of these two sections broadly speaking appears to be to protect the workmen concerned in the disputes which form the subject matter of pending conciliation proceedings or proceedings by way of reference under section 10 of the Act, against victimisation by the employer on account of raising or continuing such pending disputes and to ensure that those pending proceedings are brought to expeditious termination in a peaceful atmosphere, undisturbed by any subsequent cause tending to further exacerbate the already strained relations between the employer and the workmen.
To achieve this objective a ban, subject to certain conditions, has been imposed by section 33 on the ordinary right of the employer to alter the terms of his employees ' services to their prejudice or to terminate their services under the general law governing contract of employment and section 33A provides for relief against contravention of section 33, by way of adjudication of the complaints by aggrieved workmen considering them to be disputes referred or pending in accordance with the provi sions of the Act.
This ban, however, is designed to restrict interference with the general rights and liabilities of the parties under the ordinary law within the limits truly necessary for accomplishing the above object.
The employer is accordingly left free to deal with the employees when the action concerned is not punitive or mala fide or does not amount to victimisation or unfair labour practice.
The anxiety of the legislature to effectively achieve the object of duly protecting the workmen against victimisation or unfair labour practices consistently with the preservation of the employer 's bona fide right to maintain discipline and efficiency in the industry for securing the maximum production in a peaceful harmonious atmosphere is obvious from the overall scheme of these sections.
Turning, first to section 33, sub section
617 (1)of this, section deals with the case of a workman concerned n a pending dispute who has been prejudicially affected by an action in regard to a matter connected with such pending dispute and sub section
(2) similarly deals with workmen concerned in regard to matters unconnected with such pending disputes.
Sub section (1) bans alteration to the prejudice of the workman concerned in he conditions of service applicable to him immediately before the commencement of the proceedings and discharge or punishment whether by dismissal or otherwise of the workman concerned for misconduct connected with the dispute without the express Permission in writing of the authority dealing with the pending proceeding.
Sub section (2) places a similar ban in regard to matters not connected with the pending dispute but the employer is free to discharge or dismiss the workman by paying wages for one month provided he applies to the authority dealing with the pending proceeding for approval of the action taken.
In the case before use we are concerned only with the ban imposed against orders of discharge or punishment as contemplated by cl.
(b) of the two sub sections.
There are no allegations of alteration of the complainant 's terms of service.
It is not necessary for us to decide whether the present case is governed by sub section
(1) or sub section
(2) because the relevant clause in both the sub sections is couched in similar language and we do not find any difference in the essential scope and purpose of these two subsections as far as the controversy before us is concerned.
It is noteworthy that the ban is imposed only in regard to action taken for misconduct whether connected or unconnected with the dispute.
The employer is, therefore, free to take action against his.
workmen if it is not based on any misconduct on their part.
In this connection reference by way of contrast may be made to sub section
(3) of section 33 which imposes an unqualified ban on the employer in regard to action by discharging or punishing the workman whether by dismissal or otherwise.
In this subsection we do not find any restriction such as is contained in cl.
(b) of sub sections
(1) and (2).
Sub section (3) protects "protected workman" and the reason is obvious for the blanket protection of such a workman.
The legislature in his case appears to be anxious for the interest of healthy growth and development of trade union movement to ensure for him complete protection against every kind or order of discharge or punishment because of his special position as an officer of a registered trade union recognised as such in accordance with the rules made in that behalf.
This explains the restricted protection in sub sections
(1) and (2).
It is in the background of the purpose and scope of section 3 3 (1 and (2) that we have to consider whether the action taken against the complainant is hit by either of these two sub sections.
We have seen the form and the language of the impugned order.
On 618 its face the language does not show that the complainant 's services were terminated because of any misconduct.
Prima facie, therefore, the impugned order is not an order discharging or punishing the complainant for any misconduct.
But then the complainant 's learned counsel Shri Menon argued that the face or the form of the order is not conclusive and that the Court is entitled to and indeed should go behind the form and by looking at the real substance of the matter try to find the real cause and then come to its conclusion whether or not the order is a mere camouflage for an order of dismissal for misconduct.
The true legal position has been stated by this Court more than once and is by now beyond controversy.
In one of the most recent decisions in The Workmen of Sudder Office, Cinnamara v The Management(1) this Court approvingly referred to two of its earlier decisions actually reproducing a passage from one of them.
This is what was said in Sudder Office case : "It is needless to point out that it has been held by this Court in The Chartered Bank, Bombay vs The Chartered Bank Employees ' Union ( 2 ) that if the termination of service is a colourable exercise of the power vested in the management or as a result of victimisation or unfair labour practice, the Industrial Tribunal would have jurisdiction to intervene and set aside such a termination.
In order to find out whether the order of termination is one of the termination simpliciter under the provisions of contract or of standing orders, the Tribunal has ample jurisdiction to go into all the circumstances which led to the termination simpliciter .
The form of the order of termination, is not conclusive of the true nature of the order, for it is possible that the form may be merely a camouflage for an order of dismissal for misconduct.
It is, therefore, open to the Tribunal to go behind the form of the order and look at the substance.
If the Tribunal comes to the conclusion that though in form the order amounts to termination simpliciter but in reality cloaks a dismissal for misconduct, it will be open to it to set aside the order as a colourable exercise of power by the management.
Principles to the same effect have also been reiterated in the later decision of this Court in Tata Oil Mill Co. Ltd. vs WorKmen & anr.
(3) where the Court observed as follows : "The true legal position about the Industrial Court 's justification and authority in dealing with (1) [1971] Il L.L.J. 620.
(2) [1960] Il L.L.J. 222.
(3) [1964] II L.L.J. 113.
619 cases of this kind is no longer in doubt.
It is true that in several cases, contract of employment or provisions in standing orders authorise an industrial employer to terminate the service of his employees after giving notice for one month or paying salary for one month in lieu of notice, and normally, an employer may, in a proper case, be entitled to exercise the said power.
But where an order of discharge passed by an employer gives rise to an industrial dispute, the form of the order by which the employee 's services are terminated would not be decisive; industrial adjudication would be entitled to examine the substance of the matter and decide whether the termination is in face discharge simpliciter or it amounts to dismissal which has put on the cloak of discharge simpliciter.
If the Industrial Court is satisfied that the order of discharge is punitive, that it is mala fide, or that it amounts to victimisation or unfair labour practice, it is competent to the.
Industrial Court to set aside the order and, in a proper case, direct the reinstatement of the employee.
" Shri Menon on behalf of the complainant, however, contended that ignoring the form and language of the impugned order and looking at the real substance of the matter it is clear as disclosed by the appellant in the further written statement that the complainant 's services were terminated because of a suspicion about his private conduct and behaviour with Air Hostesses whose names were considered not proper to be disclosed.
This, said the counsel, makes out an allegation of misconduct which induced the appellant to terminate the complainant 's services and the case, therefore, clearly falls within the mischief of section 33.
The impugned order, he added, is a colourable exercise of the power under Regulation 48, the real object of the appellant being essentially to punish the complainant for misconduct.
No doubt, the position of the industrial workman is different from that of a Government servant because an industrial employer cannot "hire and fire" his Workmen on the basis of an unfettered right under the contract of employment, that right now being subject to industrial adjudication : and there is also on the other hand no provision of the Constitution like articles 3 1 0 and 3 1 1 requiring consideration in the case of industrial workmen.
We are here only concerned with the question whether the impugned action of termination of the complainant 's services is for misconduct as contemplated by section 3 3 (II) (b) or section 3 3 (2) (b).
While considering this question it is open to the complainant to urge that reliance on Regulation 48 is not bona fide, it being a colourable exercise of the right conferred by that regulation.
He has in fact raised 620 this argument and it is this aspect which concerns us in this case.
Let us now scrutinies the present record for examining the position from this aspect. ' Now, the true position, as it appears to be clear from the record of this case, is that the complainant 's services were terminated under Regulation 48 by paying his salary for 30 days in lieu of notice.
The order does not suggest any misconduct on the part of the complainant and indeed it is not possible to hold this order to be based on any conceivable misconduct.
The form of this order is no doubt not decisive and attending circumstances are open for consideration, though motive for the order, if not mala fide, is not open to question.
The further written statement which the appellant was directed to file and which was filed without prejudice discloses the fact that the appellant had lost confidence in the complainant and this loss of confidence was due to a grave suspicion regarding the complainant 's private conduct and behaviour with Air Hostesses employed by the appellant, Regulation 48 which has been set out earlier as its plain language shows does not lay down or contemplate any defined essential pre requisite for invoking its operation.
Action under this Regulation can be validly taken by the employer at his sweet will without assigning any reason.
He is not bound to disclose why he does not want to continue in service the employee concerned.
It may be conceded that an employer must always have some reason for terminating the services of his employee.
Such reasons apart from misconduct may, inter, alia, be want of full satisfaction with his overall suitability in the job assigned to the employee concerned.
The fact that the employer is not fully satisfied with the overall result of the performance of his duties by his employee does not necessarily imply misconduct on his part.
The only thing that remains to be seen is if in this case the impugned order is mala fide.
The record merely discloses, that the appellant had suspicion about the complainant 's suitability for the job in which he was employed and this led to loss of confidence in him with the result that his services were terminated under Regulation 48.
In our view, loss of confidence in such circumstances cannot be considered to be mala fide.
We are unable to conceive of any rational challenge to the bona fides of the employer in making the impugned order in the above back ground.
The complainant, it may be remembered had to deal with Air Hostesses in the performance of his duties and if the appellant was not fully satisfied beyond suspicion about his general conduct and behaviour while dealing with them it cannot be said that loss of confidence was not bona fide.
Once bona fide loss of confidence in affirmed the impugned order must be considered to be immune from challenge.
The opinion formed by 621 the employer about the suitability of his employee, for the job assigned to him even though erroneous, if bona fide, is in our opinion final and not subject to review by the industrial adjudication.
Such opinion may legitimately induce the employer to terminate the employee 's services; but such termination can on no rational grounds be considered to be for misconduct and must, therefore be held to be permissible and immune from challenge.
The decision in the case of Management of U. B. Dutt & Co. vs Workmen of U. B. Dutt & Co.(1) relied upon by the com plainant 's learned counsel is of no assistance to him.
There one employed by the management as a cross cutter in the saw mill was asked to show cause why his services should not be terminated on account of grave indiscipline and misconduct and he denied the allegations of fact.
He was thereafter informed about a departmental enquiry to be held against him and was suspended pending enquiry.
Purporting to act under r. 18 (a) of the Standing Orders, the appellant terminated the services of S without holding any departmental enquiry.
On reference of the dispute to the Industrial Tribunal this action was held not to be bona fide but a colourable exercise of the power conferred under r. 13 (a) of the Standing Order and since no attempt was made before it to defend such action by proving the alleged misconduct, it passed an order for reinstatement of section Ouite clearly the facts there are not parallel to the facts before us.
The facts there are materially different.
We have proceeded on the assumption that the reason stated in the further written statement filed without prejudice pursuant to the direction of the Labour Court could be taken into account.
We, however, must not be understood to express any opinion on its propriety either way.
In our opinion the Central Government Labour Court, Bombay, was, for the reasons foregoing, not right in holding that the complainant was guilty of misconduct and that his services were terminated for that reason.
We, therefore, allow this appeal and setting aside the order of the Central Government Labour Court, Bombay, dismiss the complainant 's petition under section 33 A of the Act.
In the peculiar circumstances of the case there would be no order as to costs.
V.P.S. Appeal allowed.
(1) [1962] Supp. 2 S.C.R. 822.

summary/full:
The respondent had bean employed by the appellant as an Assistant Station Superintendent.
An order was passed terminating his services with immediate effect With payment of one month 's salary in lieu of notice.
He filed a complaint under section 33A of the before the Labour Court before which, in industrial dispute was pending alleging that the termination of his service was illegal for the reason inter alia that the approval of ' the Labour Court for such termination was not obtained.
The appellant contended that the respondent was not a workman and that he was not concerned in the industrial dispute pending in the Labour Court.
Pursuant to the directions of the Labour Court, the appellant filed n. written statement in which it was pleaded that without prejudice to the contention that this case should be decided 'an the aforesaid preliminary points raised by the appellant the order of termination of the respondents ' services was valid 'because his services were terminated under Regulation 48 of the Air India Employees ' Service Regulations framed with previous approval of the Central Government, and under that regulation the services of a permanent employee may be terminated without assigning any reason.
it was added that without prejudice to the plea that the appellant was not bound to disclose any reason for terminating the services of the respondent, the latter 's services we 're terminated be cause of the appellant 's total loss of confidence in the respondent on account of grave suspicions regarding his private conduct and behaviour with the Air Hostesses of the appellant Corporation.
The Labour Court held one the preliminary question that the respondent was a workman concerned in the industrial dispute pending before it and that his discharge was in breach of section 33 of the Act.
On the question Whether the action taken by the appellant, was hit by section 33 of the Act, HELD: (1) Section 33 (1) (b) bans the discharge or punishment,whether by dismissal or otherwise, of a workman for misconduct nected with a pending dispute without the express permission in writing of the authority dealing with the pending proceeding.
Section 33(2)(b) places a similar ban in regard to matters not connected with the pending dispute; but the employer is free to discharge or dismiss a workman by paying wages for one month provided he applies to the authority dealing with the pending proceeding for approval of the action taken.
Whether the action is taken under.
33 (1) (b) or section 33 (2) (b), the ban is imposed only in regard to election taken for misconduct whether connected or unconnected with the dispute.
Unlike under section 33(3) which gives a blanket protection to 'protected workmen ', an employer is free to take action against other workmen if it is not based off any misconduct on their part, [617B D, C G] 607 (2) In the present case, on the face of it, the language of the order does not show that the respondent 's services were terminated because of any misconduct.
Prima facie, therefore, the impugned order was not an order discharging or punishing the respondent for any misconduct.
[618A B] (3) Action under Reg.
48 can be validly, taken by an employer at his sweet will without assigning any reason, and he is not bound to disclose why he does not want to continue in service a particular employee.
[620D E] (4) It is however open to the respondent to urge that reliance on, Reg. 48 was not bona fide and that it was a colourable exercise of the right conferred by the Regulation, because, the form of the order is not decisive and attending circumstances are open to consideration though the motive for the order, if not malafide is not open to question.
[619H; 620B C] workmen of sudder office cinnamara v Management [1971] II L.L.J. 620.
Chartered Bank, Bombay vs Chartered Bank Employees ' Union, [1960] II L.L.J. 222 and Tata Oil Mills Co. Ltd. vs WorKmen , referred to.
(5) But the reason of the employer for the terminating the services of ' his employee need not be his misconduct but may, inter cilia, be want of full satisfaction with the employee 's overall suitability in the job assigned to the employee.
Such want of satisfaction does not imply misconduct of the employee.
[620E F] (6) The loss of confidence in the present case cannot be considered to be malafide.
Assuming that the reason stated in the appellant 's written statement could be taken into account, the bona fides of the appellant in making the impugned order could not be challenged.
The respondent had to deal with Air hostesses in the performance of his duties and if the appellant was not fully satisfied beyond suspicion about his general conduct and behaviour while dealing with them it could not be said that the loss of confidence was not bona fide.
Once bona fide loss of confidence is affirmed the impugned order must be considered to be immune from challenge.
The opinion formed by the employer about the suitability of his employee for the job assigned to him, even though erroneous, if bona fide is final and not subject to review by industrial adjudication.
Such an opinion may legitimately induce the employer to terminate the employee 's services, but, such termination can, on no rational grounds, be considered to be for misconduct, and must therefore be held to be permissible and immune from challenge.
[620F H; 621A B] Management of U.B. dutt & co. vs Workmen of U. B. Dutt & Co. [1962] Supp. 2 S.C.R. 822, distinguished.
[The question whether the reason stated in the appellant 's written statement filed without prejudice and pursuant to the direction of the Labour Court could be taker into account, left open.] [621E F]


judgement:
Appeal No. 1113 of 1970.
Appeal from the judgment and order dated April 3, 1970 of the Bombay High Court in Company Appeal No. 1 of 1970.
V. M. Tarkunde, R. L. Mehta and 1.
N. Shroff, for the appellant.
M. C. Chagla and section N. Prasad, for Creditors Nos. 1, 3 to 6 and 10.
A. K. Sen and E. C. Agrawala, for creditor No. 9.
The Judgment of the Court was delivered by Ray, J.
This is an appeal by certificate, from the judgment dated 3 April, 1970 of the High Court of Bombay confirming 203 the order of the learned Single Judge refusing to wind up the respondent company.
The appellants are a partnership firm.
The partners are the Katakias.
They are three brothers.
The appellants carry on partnership business in the name of Madhu Wool Spinning Mills.
The respondent company has the nominal.
capital of Rs. 10,00,000 divided into 2000 shares of Rs. 500 each.
The issued subscribed and fully paid up capital of the company is Rs. 5,51,000 divided into 1,103 Equity shares of Rs. 500 each.
The three Katakia brothers had three shares in the company.
The other 1,100 shares were owned by N.C. Shah and other members described as the group of Bombay Traders.
Prior to the incorporation of the company there was an agreement between the Bombay Traders and the appellants in the month of May, 1965.
The Bombay Traders consisted of two groups known as the Nandkishore and the Valia groups.
The Bombay Traders was floating a new company for the purpose of running a Shoddy Wool Plant.
The Bombay Traders agreed to pay about Rs. 6,00,000 to the appellants for acquisition of machinery and installation charges thereof.
The appellants had imported some machinery and were in the process of importing some more.
The agreement provided that the erection expenses of the machinery would be treated as a loan to the new company.
Another part of the agreement was that the machinery was to be erected in portions of a shed in the compound of Ravi Industries Private Limited.
The company was to pay Rs. 3,100 as the monthly rent of the portion of the shed occupied by them.
The amount which the Bombay Traders would advance as loan to the company was agreed to be converted into Equity capital of the company.
Similar option was given to the appellants to convert the amount spent by them for erection expenses into equity capital.
The company was incorporated in the month of July, 1965.
The appellants allege that the company adopted the agreement between the Bombay Traders and the appellants.
The company however denied that the company adopted the agreement.
The appellants filed a petition for winding up in the month of January, 1970.
The appellants alleged that the company was liable to be wound up under the provisions of section 43 3 (c) of the as the company is unable to pay the following debts.
204 The appellants claimed that they were the creditors of the company for the following sums of money : A.(a) Expenses incurred by the appellants in connection with the erection of the plant and machinery.
Rs. 1,14,344.97 (b) Interest on the sum of Rs. 1,14,344.97 from 1 April, 1966 till 31 December, 1969 at 1% per mensem.
Rs. 51,453.13 (c) Commission on the sum of Rs. 1,14,344.
97 due to the app ellants at the rate of Ipercent per mensem from 1 April 1966 till 13 December,1969.
Rs. 51,453.12 B. (a) Compensation payable by the company to the appellants at the rate of Rs. 3,100 per month for 22 months and 14 days in respect of occupation of the portion of the shed given by the appellants to the company on the basis of leave and licence.
Rs.69,600.00 (b) Interest on the amount of com pensation from time to time by the said company to the appellants till 12 April, 1967.
Rs. 7,857.00 (c) Further interest on compensation from 13 April, 1967 to 31 December, 1969.
Rs. 21,576.00 C. (a) Invoices in respect of 3 machines.
Rs. 85,250.00 (b) Interest on Rs. 85,250 Rs. 37,596.00 (c) Commission at the rate of 1% per cent or Rs.85,250 Rs. 37,596.00 The appellants alleged that the company failed and neglected to show the aforesaid indebtedness in the books of account save and except the sum of Rs. 72,556.01.
The other allegations of the appellants were these.
The company incurred losses upto 31 March, 1969 for the sum of Rs. 6,21,177.53 and thereafter incurred further losses.
The company stopped functioning since about the month of Septem ber, 1969.
The company is indebted to a Director and the firms of M/s Nandkishore & Co. and M/s Bhupendra & Co. in which some of the Directors of the company are interested.
The in , debtedness of the company to the creditors including the appellant 's claim as shown by the company at the figure of Rs. 72,556.01 is for the sum of Rs. 9,56,829.47.
The liability of the company including the share capital amounted to Rs. 14,98,923.3 3.
The liability excluding the share capital of the company is Rs. 9,56,829.47 and the assets of the company on the valuation put by the company on the balance sheet amount to Rs. 8,81,171.96.
The value of the current and liquid assets is about Rs. 2,74,247.38.
The appellants on these allegations alleged that even after the proposed sale of the machinery at Rs. 4,50,000 the company would not be in a position to discharge the indebtedness of the company.
The proposed sale, of machinery for the sum of Rs. 4,50,000 was at a undervalue.
The market value was Rs. 6,00,000.
The Board did not sanction such a sale.
It was alleged that the substratum of the company disappear ed and there was no possibility of the company doing any business at profit.
The company was insolvent and it was just and equitable to wind up the company.
205 When the petition was presented to the High Court of Bombay the learned Single Judge made a preliminary order accepting the petition and directing notice to the company.
When the company appeared all the shareholders and a large number of creditors of the company of the, aggregate value of Rs. 7,50,000 supported the company and opposed winding up.
The company disputed the claims of the appellants under all the heads save the two amounts of Rs. 14,650 and Rs. 36,000 being the amounts of the second and third invoices.
The company produced books of account showing a sum of Rs. 72,556.01 due to the appellants, as on 31 March, 1969.
The company alleged that the appellants had agreed to reduction of the debt to a sum of Rs. 14,850 and to accept payment of the same out of proceeds of sale of the machinery.
The learned Single Judge held that the claims of the appel lants were disputed save that a sum of Rs. 72,556,.01 was payable by 'the company to the appellants and with regard to the sum of Rs. 72,556.01 the company alleged that there was a settlement at Rs. 14,850 whereas the appellants.
denied that there was any such compromise.
The learned Single Judge refused to wind up the company and asked the company to deposit the disputed amount of Rs. 72,556.01 in court.
The further order was that if within six weeks the appellants did not file the suit in respect of the recovery of the amount the company would be able to withdraw the amount and if the suit would be filed the amount would stand credited to the suit.
The High Court on appeal upheld the judgment and order and found that the alleged claims of the appellants were very strongly and substantially denied and disputed.
The first claim for erection of plant and machinery was to tally denied by the company.
The defences were first that the books of the company showed no such transactions; secondly, there was no privity between the company and the persons in whose names the appellants made the claims; thirdly, the alleged claims were barred by limitation; and, fourthly, there was never any demand for the alleged claims either by those persons or by ,the appellants.
The alleged claims for interest and commission were therefore equally baseless according to the defence of the Company.
The second claim for compensation was denied on the grounds ,that the appellants were not entitled to any compensation for use of The portion of the shed 'and the alleged claim was barred by imitation.
As to the claim for compensation the company relied on the resolution of the Board of Directors at which the Katakia brothers were present as Directors The Board resolved 206 confirmation of the arrangement with M/s Ravi Industries for use of the premises for the running of the industry at their shed at a monthly rent of Rs. 4,250: Prima facie the resolution repelled any claim for compensation or interest on compensation.
With regard to the claim of invoices the High Court held that the first invoice for Rs. 34,600 was paid by the company to the appellants.
The receipt for such payment was produced before the learned trial Judge.
The appellants also admitted the same.
As to the other two invoices for Rs. 14,650 and for Rs. 36,000 the amounts appeared in the company 's books.
According to the company the claim of the appellants was for Rs. 72,556.01 and the case of the company was that there was a settlement of the claim at Rs. 14,850.00.
The High Court correctly gave four principal reasons to re ject the claims of the appellants to wind up the company as creditors.
First, that the books of account of the company did not show the alleged claims of the appellants save and except the sum of Rs. 72,556.01.
Second, many of the alleged claims are barred by limitation.
There is no allegation by the appellants to support acknowledgement of any claim to oust the plea of limitation.
Thirdly, the Katakia brothers who were the Directors resigned in the month of August, 1969 and their three shares were transferred in the month of December, 1969 and up to the month of December, 1969 there was not a single letter of demand to the company in respect of any claim.
Fourthly, one of the Katakia brother was the Chairman of the Board of Directors and therefore the Katakias were in the knowledge as to the affairs of the company and the books of accounts and they signed the balance sheets which did not reflect any claim of the appellants except the two invoices for the amounts of Rs. 14,650 and Rs. 36,000.
The High Court characterised the claim of the appellants as tainted by the vice of dishonesty.
The alleged debts of the appellants are disputed, denied, doubted and at least in one instance proved to be dishonest by the production of a receipt granted by the appellants.
The books of the company do not show any of the claims excepting in respect of two invoices for Rs. 14,650 and Rs. 36,000.
It was said by the appellants that the books would not bind the appellants.
The appellants did not give any statutory notice to raise any presumption of inability to pay debt.
The appellants would therefore be required to prove their claim.
This Court in Amalgamated COmmercial Traders (P) Ltd. v.A. C. K. Krishnaswami and Anr.
(1) dealt with a petition to wind up the company on the ground that the company was indebted to the petitioner there for a sum of Rs. 1,750 being the net dividend (1) 35 Company cases 456.
207 amount payable on 25 equity shares which sum the company failed and neglected to pay in spite of notice of demand.
There were other shareholders supporting the winding up on identical grounds.
The company alleged that there was no debt due and that the company Was in a sound financial position.
The resolution of the company declaring a dividend made the payment of the dividend contingent on the receipt of the commission from two sugar mills.
The commission was not received till the month of May, 1960.
The resolution was in the month of December , 1959.
Under section 207 of the a company was required to pay a dividend which had been declared within three months from the date of the declaration.
A company cannot declare a dividend payable beyond three months.
This Court held that the non payment of dividend was bona fide disputed by the company.
It was not a dispute 'to hide ' its inability to pay the debts.
Two rules are well settled.
First if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company.
The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon.
and the sum demanded by the, creditor was unreasonable (See London and Paris Banking Corporation (1).
Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company When the company contended that the work had not been done properly was not allowed.
(See Re. Brighton Club and Norfold Hotel Co. Ltd. (2) Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt (See Re.
A Company 94 S.J. 369).
Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantity the debt precisely (See Re.
Tweeds Garages Ltd. (3) The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends.
Another rule which the court follows is that if there is opposition to the making of the winding up order by the creditors the court will consider their wishes and may decline to make the winding up order.
Under section 557 of the Company Act 1956 (1) (3) (2) ; 208 in all matters relating to the winding up of the company the court may ascertain the wishes of the creditors.
The wishes of the shareholders are also considered though perhaps the court may attach greater weight to the views of the creditors.
The law on this point is stated in Palmer 's Company Law, 21st Edition page 742 as follows : "This right to a winding up order is, however, qualified by another rule, viz., that the court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a winding up order, the court in its discretion may refuse the order '.
The wishes of the creditors will however be tested by the court on the grounds as to whether the case of the persons opposing the winding up is reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding up order is made.
It is also well settled that a winding up order will not be made on a creditor 's petition if it would not benefit him or the company 's creditors generally.
The grounds furnished by the creditors opposing the winding up will have an.
important bearing on the reasonableness of the case (See Re. P. & J. Macrae Ltd.(1).
In the present case the claims of the appellants are disputed in fact and in law.
The company has given prima facie evidence that the appellants are not entitled to any claim for erection work, because there was no transaction between the company and the appellants or those persons in whose names the appellants claimed the amounts.
The company has raised the defence of lack Of privity.
The company has raised the defence of limitation.
As to the appellant 's claim for compensation for use of shed the company denies any privity between the company and the appellants.
The company has proved the resolution of the company that the company will pay rent to Ravi Industries for the use of the shed.
As to the three claims of the appellants for invoices one is proved by the company to be utterly unmeritorious.
The company produced a receipt granted by the appellants for the invoice amount.
The falsehood of the appellants ' claim has been exposed.
The company however stated that the indebtedness is for the sum of Rs. 14,850 and the company alleges the agreement between the company and the appellants that payment will be made out of the proceeds of sale.
On these facts and on the principles of law to which reference has been made the High Court was correct in refusing the order for winding up.
Since the inception of the company Jayantilal Katakia a partner of the appellants was the Chairman of the company until 22 August, 1969.
His two brothers were also Directors of the company since its inception till 22 August, 1969.
The Bombay group had also Directors of the company.
(1) 209 The company proved the unanimous resolution of the Board at a meeting held on June, 1969 for sale of machinery of the company.
The Katakia brothers were present at the meeting.
The Katakia brothers thereafter sold their three shares to the Valia group.
The cumulative evidence in support of the case of the company is not only that the Katakia brothers consented to and approved of the sale of machinery but also parted with their shares of the company.
The three shares were sold by the Katakia Brothers shortly after each of them had written a letter on 27 July, 1969 expressly stating that they had no objection to the sale of the machinery and the letter was issued in order to enable the company to hold an Extra ordinary General meeting on the subject.
The company relied on the resolution of the Board meeting on 24 October, 1969 where it was recorded that the Valia group would sell their 367 shares and 3 other shares which they had purchased from the appellants to the Nandkishore group and the appellants would accept Rs. 14,850 in settlement of the sum of Rs. 72,000 due from the company and the company would make that payment out of proceeds of sale of the machinery.
The Board at a meeting held on 17 September, 1969 resolved that the proposal of R. K. Khanna to purchase the machinery be accepted.
On 20 December, 1969 an agreement was signed between R. K. Khanna and the company for the sale of the machinery.
At the Annual General Meeting of the company on 8 January, 1970 the Resolution for sale of the machinery was unanimously passed by the company.
It is in this background that the appellants impeached the proposed sale of the machinery as unauthorised and improvident.
The appellants themselves were parties to the proposed sale.
The appellants themselves wanted to buy the machinery at a higher figure.
These matters are within the province of the management of the company.
Where the shareholders have approved of the sale it cannot be said that the transaction is unauthorised or improvident according to the wishes of the shareholders.
It will appear from the judgment of the High Court that the creditors for the sum of Rs. 7,50,000 supported the company and resisted the appellants ' application for winding up.
There was some controversy as to whether all the creditors appeared or not.
At the hearing of this appeal the company gave a list of the creditors and notices were issued to the creditors.
Apart from the appellants, two other creditors who supported the appellants were Ravi Industries Ltd. whose name appears as one of the creditors as on 2 August, 1971 in the list of creditors furnished by the company and K. section Patel & Co. with a claim for Rs. 44,477.56 though their name does not appear in the list.
Among the creditors who 210 supported the company the largest amount was represented by Nandikshore and Company with a claim for Rs. 4,95,999.
The two creditors who supported the claim of the appellants in regard to the prayer for winding up were Ravi Industries Ltd. with a claim for Rs. 2,97,500 on account of rent and K. section Patel & Co. of Bombay with a claim for Rs.44,477.56.
It may be stated here that this claim of Rs. 44,477.56 was made on account of erection work of machinery and this identical claim was included in the list of expenses claimed by the appellants on account of erection work.
The company disputed the claim.
The High Court correctly found that the appellants could not sustain the claim to support winding up.
It is surprising that a claim of the year 1965 was never pursued until it was included as an item of debt in the petition for winding up the company.
With regard to the claim for rent, the company pursuant to an agreement between the company and Ravi Industries Private Ltd. credited Rowe Industries with the sum of Rs. 1,52,000 with the result that a sum of Rs. 1,45,500 would be payable by the company to Ravi Industries Ltd. in respect of rent.
The company alleges that Ravi Industries Pvt.
Ltd. supported the company in the High Court and that they have taken a completely different position ill this Court.
In this Court the company has also relied on a piece of writing dated 24 September, 1971 wherein Ravi Industries Private Ltd. acknowledged payment of Rs. 1,52,000 to Rowe Industries Pvt. Ltd. and further agreed to write off the amount of Rs. 1,45,500.
Ravi Industries Pvt.
Ltd. is disputing the same.
This appears to be a matter of substantial dispute.
The Court cannot go into these questions to settle debts with doubts.
Counsel for the appellants extracted observations from the judgment of the High Court that it was never in dispute that the company was insolvent and it was therefore contended the company should be wound up.
Broadly stated, the balance sheet shows the share capital of the company to be Rs. 5,51,500, the liabilities to be Rs. 9,77,829.47 and the assets to be Rs. 8,87,177.93.
The assets were less than the liability by Rs. 90,000.
Accumulated losses of the company for five years appear to be Rs. 6,21,17.53.
The plant and machinery which are shown in the balance sheet at Rs. 6,07.544.58 are agreed to be sold at Rs. 4,50,000.
There would then be a short fall in the value of the fixed assets by about Rs. 1,50,000 and if that amount is added to the sum of Rs. 90,000 representing the difference between the assets and liabilities the shortfall in the assets of the company would be about Rs. 2,50,000.
The appellants contended that the shortfall in the assets of the company by about Rs. 2,50,000 after the sale of the machinery would indicate first that the substratum of the company was 211 gone and secondly that the company was insolvent.
An allegation that the substratum of the company is gone is to be alleged and proved as a fact, The sale of the machinery was alleged in the petition for winding up to indicate that the substratum of the company had disappeared.
It was also said that there was no possibility of the company doing business at a profit.
In determining whether or not the substratum of the company has gone, the objects of the company and the case of the company on that question will have to be looked into.
In the present case the, company alleged that with the proceeds of sale the company in , tended to enter into some other profitable business.
The mere fact that the company has suffered trading losses will not destroy its substratum unless there is no reasonable prospect of it ever making a profit in the future, and the court is reluctant to hold that it has no such prospect.
(See Re.
Suburban Hotel Co.(1); and Davis & Co. vs Brunswick (Australia) Ltd. (2 ) The company alleged that out of the proceeds of sale of the machinery the company would have sufficient money for carrying on export business even if the company were to take into consideration the amount of Rs 1,45,000 alleged to be due on account of rent.
Export business, buying and selling yarn and commission agency are some of the business which the company can carry on within its objects.
One of the Directors of the Company is Kishore Nandlal Shah who carries on export business under the name and style of M// 'section Nandkishore & Co. in partnership with others.
Nandkishore & Co. are creditors 'of the company to the extent of Rs. 4,95,000.
The company will not have to meet that claim now.
On the contrary, the Nandkishore group will bring in money to the company.
This Nandkishore group is alleged by the company to help the company in the export business.
The company has not abandoned objects of business.
There is no such allegation or proof.
It cannot in the facts and circumstances of the present case be held that the substratum of the company is gone.
Nor can it be held in the facts and circumstances of the present case that the company is unable to meet the outstandings of any of its admitted creditors.
The company has deposited in court the disputed claims of the appellants.
The company has not ceased carrying on its business.
Therefore, the company will meet the dues as and when they fall due.
The company has reasonable.
prospect of business and resources.
Counsel on behalf of the company contended that the appel lants presented the petition out of improper motive.
Improper motive can be spelt out where the position is presented to coerce the company in satisfying some groundless claims made against it by the petitioner.
The facts and circumstances of the present case indicate that motive.
The appellants were Directors.
They sold, ' (1) (2) [1936] 1 A.F.R. 299.
212 their shares.
They went out of the management of the company in the, month of August, 1969.
They were parties to the proposed sale.
Just when the sale of the machinery was going to be effected the appellants presented a petition for winding up.
In the recent English decision in Mann & Anr.
vs Goldstein & Anr.
(1) it was held that even though it appeared from the evidence that the company was insolvent, as the debts were substantially ,disputed the court restrained the prosecution of the petition as an abuse of the process of the court.
It is apparent that the appellants did not present the petition for any legitimate purpose.
The appeal therefore fails and is dismissed with costs.
The company and the supporting creditors will get one hearing fee.
The amount of Rs. 72,000 which was deposited in court will remain deposited in the court for a period of eight weeks from this date and if in the meantime no suit is filed by the appellants within eight weeks the company will be at liberty to withdraw the amount by filing the necessary application.
In the event of the suit being filed within this period the amount will remain to the credits of the suit.
V.P.S. Appeal dismissed.

summary/full:
The appellants filed a petition for winding up of the respondent company, on the grounds : (1) that the company was unable to pay the debts due to the appellants, (2) that the company showed their indebtedness in their books of account for a much smaller amount, (3) that the company was indebted to other creditors, (4) that the company was effecting an unauthorised sale of its machinery, and (5) that the company had incurred losses and stopped functioning, and therefore the substratum of the company disappeared and there was no possibility of the company doing any business at profit.
The High Court dismissed the petition.
Dismissing the appeal to this Court, HELD : The rules for winding up on a creditor 's petition are if there is a bona fide dispute about a debt and the defence is a substantial one, the court would not ' order winding up.
The defence of the company should be in good faith and one of substance.
if the defence is likely to succeed on a point of law and the company adduced prima facie proof of the facts on which the defence depends, no order of winding up would be made by the Court.
Further under section 557 of the , in all matters relating to winding up of a company the court may ascertain the wishes of the creditors.
If, for some good reason the creditors object to a winding up order, the court, in its discretion, may refuse to pass such an order.
Also, the winding up order will not be made on a creditor 's petition if it would not benefit the creditor or the company 's creditors generally.
[207 D, G H; 208 C D] (1) In the present case, the claims of the appellants were disputed both in fact and in law.
The company had given prima facie evidence that the appellants were not entitled to any claim.
The company had also raised the defence of lack of privity and of limitation.
[208 D F] (2) One of the claims of the appellants was proved by the company to be unmeritorious and 'false, and as regards the admitted debt the company had stated that there was a settlement between the company and the appellants that the appellants would receive a lesser amount and that the company would pay it off out of the proceeds of sale of the company 's properties.
[208 F G] (3) The creditors of the company for the sum of Rs. 7,50,000 supported the company and resisted the appellants ' application for winding up.
[209 G] (4) The cumulative evidence in support of the case of the company is that the appellants consented to any approved of the sale of the machinery.
As shareholders, they had expressly written that they had no objection to the sale of the machinery and the letter was issued in order to enable the company to hold an extraordinary general meeting on the subject.
The company passed a resolution authorising the sale.
The 256 Sup.
Cl/72 202 appellants themselves were parties to the proposed sale and wanted to buy the machinery.
Where the shareholders had approved of the sale it could not be said that the transaction was unauthorised or improvident.[209 A F] (5) In determining whether or not the substratum of the company had gone, the objects of the company and the case of the company on that question would have to be looked into.
In the present case, the company alleged that with the proceeds of sale the Company intend to enter into some other profitable business.
such as export business which was within its objects.
The mere fact that it had suffered trading losses will not destroy its substratum unless there is no reasonable prospect of it ever making a profit in the future.
A court would not draw such an inference normally.
One of its largest creditors, who opposed the winding up petition would help it in the export business.
The company had not abandoned the objects of its business.
Their ,fore, on the facts and circumstances of the present case it could not be held that the substratum of the company had gone.
Nor could it be held that the company was unable to meet the outstandings of any of its admitted creditors.
The company had deposited money in court as per the directions of the Court and had not ceased carrying on its business.
[211A G] (6) On the facts of the case it is apparent that the appellants had presented the petition with improper motives and not for any legitimate purpose.
The appellants were its directors, had full knowledge of the company 's affairs and never made demands 'for their alleged debts.
They sold their shares, went out of management of the company and just when the sale of the machinery was going to be effected presented the petition for winding up.
[211 A; 212 A C] Amalgamated Commercial Traders (P.) Ltd. vs A. C. K. Krishnaswami & Anr., , London & Paris Banking Corporation, , Re.
Brighton Club & Norfold Hotel Co. Ltd., ; , Re. A. Company, 94 S.J. 369, Re.
Tweeds Garages Ltd., (1962) Ch.
406, Re. P. & J. Macrae Ltd., , Re.
Suburban Hotel Co. and Davis & Co.v.
Burnswick (Australia) Ltd., , and Mann & Am .v.
Goldstein & Anr., , referred to.