Court Receiver Appointed For Selling Assets Of Partnership Firm Can’t Be Expected To Run Factory: Bombay High Court
The Bombay High Court said that it would be absurd to treat the Court Receiver as ‘employer’ for the purpose of application of provisions of Section 25-O of the Industrial Disputes Act, 1947.
Justice Sandeep V. Marne, Bombay High Court
The Bombay High Court held that the Court Receiver appointed for selling assets of the partnership firm, cannot be expected to run the factory.
The Court held thus in a Writ Petition filed by the Court Receiver, challenging the Judgment of the Member, Industrial Court which allowed the complaint of unfair labour practice.
A Single Bench of Justice Sandeep V. Marne observed, “The further direction of the Industrial Court for opening the factory for the purpose of reporting of workmen on duties is something which was not even prayed for in the complaint. The Industrial Court could not have granted something which was never prayed by the workmen. Even otherwise, the Court Receiver, appointed for selling assets of the partnership firm, cannot be expected to run the factory. Therefore, the direction for opening of the factory for reporting of the workers is equally unsustainable and liable to be set aside.”
The Bench said that it would be absurd to treat the Court Receiver as ‘employer’ for the purpose of application of provisions of Section 25-O of the Industrial Disputes Act, 1947 (ID Act) and since there is no employer, there is no question of making any application under Section 25-O of the ID Act.
Senior Advocate J.P. Cama appeared for the Petitioner, while Senior Advocate A.V. Bukhari, Advocates Z.A. Jariwala, Malcolm Siganporia, and Anand Pai appeared for the Respondents. Senior Advocate Kiran Bapat appeared for the Interveners.
Brief Facts
The Court Receiver was appointed in a suit for dissolution of the Respondent-partnership firm, which was engaged in the business of manufacturing and marketing cooking oil and other edible oils under a well-known brand ‘Postman’. The said firm had its factory and office located in Mumbai and branch offices in other States. The dispute arose amongst partners of the firm and hence, a suit for dissolution was filed.
A complaint was filed by the Mumbai Labour Union alleging unfair labour practice and seeking payment of full wages to the concerned employees from January 2002 with interest at the rate of 6% per annum. The Industrial Court allowed the same and directed opening of factory by permitting the concerned workers to report for duties at the factory premises. This was under challenge before the High Court.
Reasoning
The High Court in the above regard, noted, “… the interplay between the provisions of the Companies Act,2013 relating to winding up of the Company and section 25-O of the ID Act, as dealt with by the Division Bench of this Court, would indicate that a separate closure need not be effected under section 25-O of the ID Act when a company is wound up. Similar analogy can be adopted here. The only difference here is that an order for dissolution of the firm is yet to be passed. However the Partnership Act has a different statutory scheme under which a partnership at will is capable of being dissolved by issuance of notice under Section 43. There is no requirement of formal order of dissolution of a partnership firm.”
The Court was of the view that the dissolution of a partnership firm can be effected without intervention of a Court and therefore, passing of a formal decree in the suit for dissolution of partnership at will is not necessary.
“… in my view, a formal closure order under Section 25-O would not be necessary for effecting closure of undertaking of the industrial establishment of the Firm. … the Industrial Court has grossly erred in holding that business of the partnership firm would continue till decision of Suit No. 4913 of 2000. On account of appointment of Receiver for selling of assets of the Partnership Firm, the business of the Partnership Firm has come to an end. In the peculiar facts and circumstances of the present case, it is not possible to secure a separate closure permission under section 25-O of the ID Act”, it further said.
The Court remarked that the Industrial Court grossly erred in directing payment of wages to the workers from January 2002 and the impugned Judgment and Order passed by the Industrial Court deserves to be set aside to that extent.
“If contract workers can be paid compensation, I see no reason why closure compensation cannot be paid to the permanent workmen. In my view therefore, considering the fact that the business of the Partnership Firm has been closed, the least that needs to be paid to the permanent workmen is closure compensation. Though the dissolution of the firm may obviate the requirement of seeking prior permission of the Appropriate Government for closure of undertaking of an industrial establishment, the firm would still be liable to pay closure compensation to the workmen”, it added.
Conclusion
Considering the fact that the workers were engaged in long legal battle, the Court observed that it would not be appropriate to drive them to another round of litigation before the Controlling Authority under the Payment of Gratuity Act, 1972.
“It would therefore be appropriate to direct payment of gratuity to each of the permanent workmen if not already paid. The Petitioner-Court Receiver needs to make an enquiry about existence of gratuity fund and its status. In any case regardless of existence or otherwise of the gratuity fund, the Firm is liable to pay gratuity to the workers, which liability needs to be discharged by the Court Receiver on behalf of the Partnership Firm”, it also noted.
The Court, therefore, concluded that the payment of simple interest @ 6% p.a. on amounts of gratuity and closure compensation would meet the ends of justice.
Accordingly, the High Court partly allowed the Petition and set aside the impugned Judgment.
Cause Title- The Court Receiver High Court, Bombay v. Mumbai Labour Union and Ors. (Neutral Citation: 2025:BHC-OS:16785)
Appearance:
Petitioner: Senior Advocate J.P. Cama, Advocates K.P. Anilkumar, Amit Saple, and Priyanka Kumar.
Respondents: Senior Advocate A.V. Bukhari, Advocates Z.A. Jariwala, Malcolm Siganporia, Anand Pai, Kishorekumar Shetty, Pranita Saboo, Bhavin Shah, Dev Tejnani, and Sahil S. Sayed.
Interveners: Senior Advocate Kiran Bapat, Advocates Sachin B. Thorat, and Yogesh G. Thorat.
