A) ABSTRACT / HEADNOTE

This case concerns the intersection between the Companies Act, 1956 and the Industrial Disputes (Appellate Tribunal) Act, 1950, particularly regarding the right of appeal in industrial dispute awards when a company is in liquidation. The dispute originated after 142 employees of Great Indian Motor Works Ltd. were discharged during liquidation proceedings. The auction-purchaser of the company (who was also its former Managing Director) was impleaded but exonerated by the Industrial Tribunal, which held no employer-employee relationship existed between him and the discharged workers. The Tribunal directed the Official Liquidators to pay retrenchment compensation under Section 25F(b) of the Industrial Disputes Act, 1947. When the High Court refused sanction under Section 457 of the Companies Act, 1956 for the Liquidators to appeal, the auction-purchaser and the company (represented by him) filed an appeal before the Labour Appellate Tribunal without such sanction. The Tribunal dismissed the appeal as incompetent, holding that: (i) Only the Official Liquidator with court sanction can represent the company in proceedings; and (ii) The auction-purchaser was not an “aggrieved party” under Section 12 of the Industrial Disputes (Appellate Tribunal) Act, 1950 since the award made no order against him. The Supreme Court upheld this dismissal, ruling there was no inconsistency between Section 457 of the Companies Act and Section 12 of the Industrial Disputes (Appellate Tribunal) Act. It clarified that the right of appeal exists only for an aggrieved party, and that procedural requirements like prior court sanction for Liquidators remain intact. This case firmly established that exonerated parties lack locus standi to appeal and reinforced the primacy of winding-up provisions in litigation involving companies under liquidation.

Keywords: Companies Act 1956, Section 457, Industrial Disputes Appellate Tribunal Act 1950, Section 12, locus standi, liquidation, auction-purchaser, industrial dispute, retrenchment compensation, aggrieved party.

B) CASE DETAILS

i) Judgement Cause Title:
Great Indian Motor Works Ltd. (in liquidation) & Anr. v. Their Employees & Others

ii) Case Number:
Civil Appeal No. 447 of 1957

iii) Judgement Date:
6 May 1959

iv) Court:
Supreme Court of India

v) Quorum:
B.P. Sinha, P.B. Gajendragadkar, and K.N. Wanchoo, JJ.

vi) Author:
Justice B.P. Sinha

vii) Citation:
1960 (1) SCR 13

viii) Legal Provisions Involved:

• Section 457, Companies Act, 1956

• Section 12, Industrial Disputes (Appellate Tribunal) Act, 1950

• Section 25F(b), Industrial Disputes Act, 1947

ix) Judgments overruled by the Case:
None reported.

x) Case is Related to which Law Subjects:
Corporate Law, Industrial Law, Labour Law, Procedural Law.

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The case arose from the winding-up of Great Indian Motor Works Ltd., incorporated in 1926 with operations in public transportation and motor vehicle repair. Due to shareholder disputes and financial distress, the Calcutta High Court ordered compulsory winding-up in July 1951. The Official Liquidators were empowered to sell the company as a going concern. In June 1954, former Managing Director K.D. Nundy purchased the business in auction. Before transferring possession, the Liquidators terminated the services of 142 employees.

An industrial dispute followed, implicating both the Liquidators and the auction-purchaser. The Third Industrial Tribunal exonerated the auction-purchaser, holding there was no employer-employee relationship post-termination, and awarded compensation against the company in liquidation payable by the Liquidators from available assets. The High Court denied Liquidators sanction to appeal under Section 457 of the Companies Act. The auction-purchaser and the company (represented by him) appealed without sanction, leading to the dismissal that forms the crux of this case.

D) FACTS OF THE CASE

• Company Incorporation and Operations: Great Indian Motor Works Ltd. was a private limited company with public transport operations in Calcutta.

• Winding-Up Proceedings: Shareholder disputes led to a winding-up order on 23 July 1951. Joint Official Liquidators were appointed in December 1951 with power to sell the business as a going concern.

• Auction Sale: On 12 June 1954, K.D. Nundy, former Managing Director, purchased the company’s business for ₹1,42,500, free of all liabilities. Sale confirmed on 5 July 1954.

• Termination of Employees: On 23 July 1954, the Liquidators terminated 142 employees’ services effective the next day.

• Industrial Dispute: Reference made under Section 10 of the Industrial Disputes Act, 1947, raising issues of legality of termination and refusal of auction-purchaser to re-employ.

• Tribunal Award: Held no employer-employee relationship existed with auction-purchaser; ordered compensation under Section 25F(b) payable by Liquidators from assets.

• Appeal Attempt: High Court refused Liquidators sanction to appeal under Section 457. Auction-purchaser and company (through him) appealed without sanction to the Labour Appellate Tribunal.

• Appellate Tribunal Ruling: Dismissed appeal in limine as unauthorised and auction-purchaser not an “aggrieved party.”

E) LEGAL ISSUES RAISED

i. Whether Section 457 of the Companies Act, 1956 overrides or conflicts with Section 12 of the Industrial Disputes (Appellate Tribunal) Act, 1950 regarding appeal rights.
ii. Whether an auction-purchaser exonerated by the Tribunal qualifies as an “aggrieved party” entitled to appeal.
iii. Whether an appeal filed in the company’s name by a former Managing Director without court sanction is maintainable during liquidation.

F) PETITIONER/APPELLANT’S ARGUMENTS

i. The appellants argued that Section 12 of the Industrial Disputes (Appellate Tribunal) Act, 1950 allowed “any party aggrieved” to appeal regardless of liquidation procedures under the Companies Act.
ii. They contended that Section 3 of the same Act gave it overriding effect over inconsistent provisions of other laws.
iii. The auction-purchaser claimed locus standi as he was impleaded in the original reference and thus had standing to appeal.

G) RESPONDENT’S ARGUMENTS

i. The employees and Liquidators contended that under Section 457 of the Companies Act, 1956, only the Official Liquidator, with prior court sanction, could initiate legal proceedings in the company’s name during liquidation.
ii. The auction-purchaser had been exonerated and thus was not an “aggrieved party” under Section 12 of the Industrial Disputes (Appellate Tribunal) Act.
iii. They maintained that there was no inconsistency between the Companies Act and the Industrial Disputes Appellate Tribunal Act.

H) JUDGEMENT

a. Ratio Decidendi

• No Inconsistency: Section 457 of the Companies Act and Section 12 of the Industrial Disputes (Appellate Tribunal) Act operate in separate spheres; the latter does not override the former.

• Sanction Requirement: During liquidation, the Liquidator requires court sanction to appeal in the company’s name.

• Aggrieved Party Requirement: Only parties against whom an award is made can appeal; exonerated parties lack locus standi.

b. Obiter Dicta

• Existence of an industrial dispute requires an employer-employee relationship at the time of dispute; once terminated before transfer of business, purchaser assumes no liabilities unless purchased with liabilities.

c. Guidelines

1. Appeals by companies in liquidation require compliance with Section 457—sanction from the winding-up court is mandatory.

2. Section 12 of the Industrial Disputes (Appellate Tribunal) Act does not abolish procedural preconditions under other laws.

3. Parties exonerated in the award cannot claim to be “aggrieved” for the purposes of appeal.

I) CONCLUSION & COMMENTS

The Supreme Court reinforced procedural discipline in litigation involving companies under liquidation, upholding the primacy of the winding-up court’s supervisory role. It clarified that appeal rights are contingent not only on statutory definitions like “aggrieved party” but also on compliance with procedural safeguards like prior sanction. The judgment also affirmed the principle that auction-purchasers who acquire businesses free of liabilities are not burdened with predecessor’s employment obligations unless explicitly assumed.

J) REFERENCES

a. Important Cases Referred

• Official Liquidator v. Dharti Dhan (P) Ltd., (1977) 2 SCC 166 – On powers of liquidator and necessity of court sanction.

• R. v. London County Council, ex parte Entertainments Protection Association Ltd. [1931] 2 KB 215 – On locus standi of aggrieved parties.

b. Important Statutes Referred

• Companies Act, 1956 – Section 457

• Industrial Disputes (Appellate Tribunal) Act, 1950 – Section 3, Section 12

• Industrial Disputes Act, 1947 – Section 25F(b)