1. In this application by the Official Liquidator, the prayer is for the issue of certain directions which are described as ancillary to the principal direction made in the order dated 6 July, 1962 in Company Application No. 34 of 1961 for payment of retrenchment compensation to the workers of the company as preferential claim.
2. The directions now sough fall under two heads :
(1) Permission or authorization to deduct from the retrenchment compensation payable to the workers amounts due form them on account of -
(a) advances made to them by the company,
(b) rent and water-tax on account of house accommodation provided to them, and
(c) amounts due by them to the Mysore Spun Silk Mills Co-operative Society, Ltd.
(2) The mode of or procedure for making payments.
3. Out of the deductions sought to be made, those for recovery of advances and rent and water-tax in respect of house accommodation are, it is argued by the Official Liquidator, deductions authority by S. 7 of the Payment of Wages Act (Central Act IV of 1936) as amended in Mysore by the Payment of Wages (Mysore Amendment) Act of 1952 (Act XV of 1952).
4. Sub-section (1) of S. 7 of the Payments of Wages Act lays down the general rule that the wages of an employed person shall be paid to him without deduction of any kind except those authorized by or under the Act. Sub-section (2) thereof gives a list of deductions which may be made. Clause (f) of Sub-section (2) mentions deduction for recovery of advances an one of the deductions authorized by the Act. By the Payment of Wages (Mysore Amendment) Act of 1952 mentioned above, two clauses were added to Sub-section (2) of S. 7 of the principal Act, one of which is the following :
'(m) deduction specially authorized by the State Government for a purpose beneficial to the employed person.'
5. Pursuant to this clause, the Government of Mysore issued on order No. L.L.H. 62 L.B.M. 57 dated 11 October, 1957, which reads as follows :-
'Whereas deductions from the wages of employed persons for house accommodation supplied by the employer or by the State Government or by a statutory housing boards is a purpose beneficial to the employed persons;
Now, therefore, in exercise of the powers conferred by Clause (m) of Sub-section (2) of S. 7 of the Payment of Wages Act, 1936 (Central Act V of 1936), as a mended by the Payment of Wages (Mysore Amendment) Act, 1952 (Mysore Act XV of 1952), as in force in the Mysore are, the Government of Mysore specially authorize the reductions from the wages of employed persons for house accommodation supplied by the employer, or by the Government of Mysore of by the Mysore Housing Boards.'
6. It is an admitted fact that the workers of the company were housed in tenements constructed by the Mysore Housing Boards constituted under the Mysore Housing Board Act of 1955 and placed at the disposal of the company for the purpose of providing the workers with house accommodation. It is also not denied that before the company went into liquidation, rent in respect of tenements and water-tax for water consumed by the workers were being deducted regularly from the wages payable to them.
7. The further argument of the Official Liquidator is that retrenchment compensation directed to be paid to the workers as a preferential payment within the meaning of Clause (b) of Sub-section (1) of S. 530 of the Companies Act of 1958 is 'wages' within the meaning of both the Payment of Wages Act and the Industrial Disputes Act, and that, therefore, the deductions mentioned above can lawfully be made therefrom.
8. Sri Balaji on behalf of the workers has objected to the deductions being made as claimed by the Official Liquidator on two principal grounds :
(1) that deductions authorized by the Payment of Wages Act could be made only by an employer but that there is no relationship of employer and employee between the Official Liquidator and the workers of the company which is being wound up, and
(2) that deductions could only be made under the said Act from wages but that retrenchment compensation directed to be paid to the workers under S. 530(1)(b) of the Companies Act cannot properly be described as 'wages'.
9. Section 530(1)(b) of Companies Act reads as follows :
'530. (1) In a winding-up, there shall be paid in priority to all other debts :
(a) * * * (b) all wages or salary (including wages payable for time piece-work and salary earned wholly or in part day by way of commission) of any employees, in respect of service rendered to the company and due for a period not exceeding four months within the twelve month next before the relevant date and any compensation payable to any workman under any of the provisions of chap. V-A of the Industrial Disputes Act, 1947, subject to the limit specified in Sub-see. (2).'
10. The limit specified in Sub-see. (2) is not of relevance in this application. The relevant date, according to Sub-see. (8) of the same section, would in this case be the date of the first appointment of the provisional liquidator.
11. The first proposition of Sri Balaji, viz, the deduction could be made only by an employer from out of wages payable by him, necessarily follows upon the earlier step of payment of wages which again, according to the Payment of Wages Act, is a liability resting on an employer. If, therefore, Sri Balaji wants to contend, so far as deductions are concerned, that the condition precedent for such conditions is the continued existence of relationship of employer and employee, then he should necessarily accept the position that the condition precedent for workers claiming payment from the official liquidator should also be the existence of relationship of employer and employee between the liquidator and the workers. In other words, if the liquidator cannot be considered to be in the position of an employer in relation to workers of a company in liquidation of any purpose, the workers themselves should be held to be disentitled from making any claim for payment of any amount in the nature of wages.
12. Apart from the lack of logic in the line of argument propounded by Sri Balaji, the actual position in law appears to me to be that when service of an employee under an employer come to an end, the liability of the employer either under the contract of employment or under the law in respect of arrears of wages payable to an employee whose services have been terminated and in respect of compensation or other amounts payable to the said employee on account of termination of services continues to exist and is enforceable at the instance of the employee despite the fact that the actual relationship of employer and employee has ceased to exist between them. A contrary view would have consequences disastrous to the interests of the workers themselves, because an employer, by merely termination the service of his employee, would be enabled to claims complete immunity from all liability for arrears of wages or retrenchment compensation. Such cannot be and is not the position law. The first argument, therefore, falls.
13. The question whether retrenchment compensation paid under the provisions of Chap. V-A of the Industrial Disputes Act does or does not come within the meaning of 'wages' for the purpose of making deduction therefrom under the Payment of Wages Act, depends primarily, if not solely, on the definition of 'wages' contained in the latter Act. There relevant portion of that definition contained in S. 2(g)(vi) is as follows :
''Wages' means all remuneration (whether by way of salary, allowances or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment and includes :
(a) * * * (b) * * * (c) * * * (d) any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for payment of such sum, whether with or without deductions, but does not provide for the time within which the payment is to be made.'
14. It will be seen that the language of the definition itself is so clear that one could scarcely entertain any doubt on the question whether retrenchment compensation is or is not include within it. The definition in express terms included within the meaning of 'wages' a sum which by reason of the termination of employment becomes payable under any law. The law which makes such sum payable by an employer is contained in Chap. V-A of the Industrial Disputes Act. It is also clear that such payment is one in respect of employment, because it is compensation for loss of employment, on account of the termination of services. It is unnecessary to cite cases in support of this view. However, reference may be made to the decision of the Supreme Court in Bala Subrahmanya Rajaram v. B. C. Patil [1958 - I L.L.J. 773] and to the decision of a Bench of this Court in Chandrasekhar v. Abdullah [1963 - II L.L.J. 675].
15. Sri Balaji, however, has sought to make a distinction by contending that any sum which by reason of the termination of employment becomes payable under the law could only mean what is made payable under S. 25F of the Industrial Disputes Act, whereas the payments directed by this Court are those falling under S. 25FFF of the same Act on account of the closing down of the business of the company. In the case of a closure, Sri Balaji points out, amounts are paid an employee, not because the closure amounts to retrenchment, but in the words of S. 25FFF itself 'as if the workman had been retrenched'. It seems to me that this is a distinction without of difference. It is no doubt true that the expression 'as if the workman had been retrenched', may be said to proceed on the footing that but for this provisions of law the situation could not have been described as retrenchment. But if the law regards the position to be the same as that of retrenchment for purpose of making payments directed by it. I do not think it is open to make any claims or draw any inferences on the footing that the position is different from what the law itself declares it to be.
16. Further, the definition of the term 'retrenchment' contained in S. 2(oo) of the Industrial Disputes Act makes it clear that retrenchment is termination by any employer of the service of a workman for any reason whatsoever otherwise than as a punishment inflict by way of disciplinary action, excluding cases of voluntary retirement, retirement on superannuation and termination of services on the ground of continued ill-health. Termination of services following upon a general closure of his business or industry by the employer must, therefore, be taken to amount to retrenchment.
17. The second argument also therefore falls. Hence it has to be held that retrenchment compensation directed to be paid by this Court falls within the definition of 'wages' and the official Liquidator is entitled to deduct therefrom the amounts due from individual employees in account of advances made to them by the company and on account of rent and water-tax in respect of house accommodation provided to them.
18. In regard to the correctness of the amounts to be deducted from the retrenchment compensation payable to each worker or workman and set out in the tabulated statement filed by the Official Liquidator, no objection having been made by anyone in spite of the liberty given by me to counsel for the workmen to respect the books in possession of the liquidator and to file objections, if any, it has to be held that the figures calculated by the Official Liquidator are no longer open to question.
19. I, therefore, authorize the Official Liquidator to deduct from retrenchment compensation payable to each worker the amounts as calculated by the Official Liquidator and set out in the tabulated statement as due from such worker on account of advances made to him by the company and on account of rent and water-tax in respect of house accommodation provided to him.
20. So far as the claims of the co-operative society are concerned, the Official Liquidator points out that the only provision for making deduction from wages on account of amounts payable by the workmen to the society is S. 34 of the Mysore Co-operative Societies Act of 1959, which reads as follows :
'34. Deduction from salary to meet society's claim in certain cases. - (1) Notwithstanding anything contained in any law for the time being in force, a member of a so-operative society may execute an agreement in favour of the society providing that his employer shall be competent to deduct from the salary or wages payable to him by the employer, such amount as may be specified in the agreement, and to pay the amount so deducted to the society in satisfaction of any debt or other demand owing by the member to the society.
(2) On the execution of such an agreement the employer shall, if so required by the co-operative society by requisition in writing and so long as such debt or demand or any part of the remains unpaid, make the deduction in accordance with the agreement and pay the amount so deducted to the society within fourteen days from the date of the deduction.
(3) Nothing contained in this section shall apply to person employed in railways as defined in Art. 366 of the Constitution, mines and oil-fields.
21. I gave time to the Official Liquidator to contact the liquidator of the society which also seem to be now under liquidation to produce the agreements, if any, executed by the workers as member of the society. The liquidator has now filed a memorandum in which he states that no agreement is traceable, that the co-operative society department also could not throw any light on the matter and that all that could be say is that the society was supplying foodgrains and cloth and also granting loans to the workers and that the amounts due in respect of the same were being collected by the company every month from the wages due to the workmen and remitted to the society. In the absence of any agreement, I do not think I can permit any deductions being made from the retrenchment compensation on account of the amounts said to be due to the co-operative society. Permission to make any such deduction is therefore refused.
22. Coming now to the second point on which direction are sought, viz. the procedure for making payments, no occasion for asking for such direction could arise, because the Company (Court) Rules themselves prescribe the procedure and the forms therefor - vide rules 276 and 277 and forms 138 and 139. At earlier stages of the hearing of this application, suggestions were made to me that because the majority of workers to whom retrenchment compensation is payable are working the mills now under the directions of the State Government, it might be convenient if payments could be arranged to be made at the premises of the mills.
23. Taking the view that the suggestions might workout satisfactorily and enable the liquidator to complete the disbursement expeditiously, I directed him to collect opinion from the person associated with or interested in the workers and also call before me some of the farmer officers of the company to enquire whether they would be willing to assist the liquidator in the matter of identifying the workers and in other identical matters. I found, however, that the position instead of getting clarified appeared to become more complicated and to assume the character of an unseemly competition between rival claimants to leadership of labour. I have therefore dropped further enquiry into this aspect of the matter, being clearly of the opinion that the Company Court cannot be permitted to be made use of in this way.
24. I, therefore, direct the Official Liquidator to proceed in accordance with rules 276 and 277 and the particulars set out in forms 138 and 139 of the Company (Court) Rules with the following further directions :
The notice in form 138 should set out the gross amount of retrenchment compensation payable to each worker, deduction to be made therefrom and the net amount payable to him. It should contain the following further particulars, viz., that the person entitled to receive the payment may request the same to be dispatched to him by postal money order subject to deduction of postal commission for the money order on that thumb-impressions of illiterate workers on receipts, and whenever a worker authorizes another person in from 139, the signature or thumb-impression of such worker on both the receipt and the authorization in form 139, should be attested by a magistrate or a tahsildar or a gazetted officer of the State Government who should, after satisfying himself about the identity of the worker, attest the same and affix under his attestation the seal of his Court or office. I also direct that when a worker or a person authorized by him to receive the payment on his behalf presents himself before the liquidator for receiving payment the liquidator should, before making the payment, satisfy himself about the identity of the worker or such person and enter a certificate in writing on the relevant paper to the effect either that he knows the worker or such person or that the worker or such person has been duly identified before him by a person known to him.
25. As no further directions are required in this matter, this application will stand closed.