012-NLR-NLR-V-79-2-A.-A.-LATIFF-and-ANOTHER-Petitioners-and-L.-E.-J.-FERNANDO-and-TWO-OTHER.pdf
Latiff V- Fernando
89
1978
L.
Present: Samarakoon. C.J., Sharvananda, J. andXatwat.a, J.
A. A. LATIFF and ANOTHER, Petitionersand
J. FERNANDO and TWO OTHERS, RespondentsS. C. Application No. 911/74
90
SHARVAH AND A, J.—Latijf v. Fernando
Industrial Disputes Act, section 4—Dispute regarding termination bycompany of the services of its workmen—Reference to arbitration—Liquidator of the company which was being wound up made arespondent—Jurisdiction of arbitrator to make award against
• such liquidator—Can consent confer such, jurisdiction.
Companies Ordinance, sections 216, 218, 232, 239—Winding up ofcompany—Appointment of liquidator—His status and powers—Validity of order against liquidator in proceedings underIndustrial Disputes Act.
Where a dispute between certain workmen who were membersof a Trade Union and a company incorporated under the CompaniesOrdinance which said company was in liquidation, was referredto arbitration under section 4 of the Industrial Disputes Act andthe Arbitrator after holding an inquiry made his award directingthe company as well as its liquidator to deposit certain amountswith the Assistant Commissioner of Labour.
Held : (1) That a liquidator of a company which is being woundup cannot be personally liable for the obligations of the companyand no award under the Industrial. Disputes Act could have beenmade against him by the Arbitrator.
(2) That the fact that the company and its liquidator did notprotest against the assumption oi jurisdiction by the Arbitratorcould not confer on him jurisdiction to proceed against or rngke anaward against the liquidator on the industrial dispute in question.The award against the liquidator lacked any legal basis and wasnull and void.
Per Sharvananda, J. :
“ According to section 218, a voluntary winding up shall bedeemed to commence at the time of passing of the resolutionfor voluntary winding up ; and section 219 provides that, in thecase of a voluntary winding up, the company shall, from thecommencement of the winding up, cease to carry on its business,except so far as may be required for the beneficial winding upthereof, provided that the corporate state and corporate powers ofthe Company shall, not withstanding anything to the contraryin its articles, continue until it is dissolved. There is no change ofpersonality. Section 232(2) provides that in the case of a creditor’svoluntary winding up, all the powers of the directors cease on theappointment of a liquidator, except so far as the committee ofinspection, or if there is no such committee, the 'creditors sanctionthe continuance thereof. The liquidator assumes all the functionsof the directors, but in the performance thereof he is charged withcertain special' statutory duties of collecting and realising theCompany’s assets and discharging its debts and liabilities. He isgiven wide powers for the purpose of winding up the Company’saffairs and distributing its assets. The property of the companydoes not vest in him ; the company continues in existence and headministers the affairs of the company on behalf of the company.Before a resolution to wind up voluntarily is passed, the manage-ment of the company is in the hands of the officers, the directors ;after such a resolution, it is in the hands of its agent, the liquidatorand the Company, acting by its agent, the liquidator, carries out itsobligations towards its employees.”
Cases referred to :
Knowles v. Scott, (1891) 1 Ch. 717 ; 64 L. T. 135 ; 60 L.J. Ch. 284;7 T.L.R. 306.
Fraser v. The Province of Brescia Steam Tramways Co., (1887)56 L.T. 771 ; 3 T.L.R. 587.
In re The Anglo-Morovian Hungary Junction Railway Company, Ex-pane Wat kin, (18 75) 1 Ch. D. 130 ; 45 L. J. Ch. 115 ; 33 L. T. 650.
APPLICATION for a Writ of Certiorari.
EHAHV A2s AA DA, X.—Lutiff v. Fernando
91
W. Jayewardene, Q.C., with. M. S. M. Nazeem and Miss
Walles, for the petitioners.
Siva Rajaratna",'. for the 3rd respondent.
• G. P. S. de Silva, Deputy Solicitor-General, with G. K. K. Wife-wardena, State Counsel, for the 4th respondent.
Cur. adv. vult.
July 20, 1978. Skarvahahda, J.
The 2nd petitioner, on this application, is Sheldons Ltd. acompany incorporated under the provisions of the' CompaniesOrdinance. It has gene into creditors’ voluntary winding up andthe 1st petitioner is the liquidator appointed by its creditors.Prior to its going into liquidation, it was carrying on the businessof rubber dealers and suppliers of rubber to the Commissionerof Commodity Purchase in Ceylon. Since the Commissioner ofCommodity Purchase decided, by his order dated 31.5.73. thathe would not buy rubber from the 2nd petitioner any more,the company could not carry on the business any longer and itwas resolved to voluntarily wind up the company. The credi-tors of the company appointed the 1st petitioner A. A. LatifEas liquidator of the company and he thereafter functioned asliquidator of the company.
On certain workmen of the 2nd petitioner, who were membersof the 3rd respondent-Union, making a compaint to the Commis-sioner of Labour against the termination of their, servicesconsequent to the closure of the company’s business, the Minis-ter of Labour, acting under section 4 of the Industrial DisputesAct, referred, by reference dated 14.3.74, the following industrialdispute to the 1st respondent for settlement by arbitration:
“ In the matter of an industrial dispute between Sri LankaNidahas Welanda Ka Karmika Ayathana Sewaka Sangamaya
and certain workmen on the one part and Messrs
Sheldons Ltd. (under liquidation), No. 361, Grandpass Road,Colombo 14, and Mr. A. A. Latiff (Chartered Accountant),
liquidator of Messrs Sheldons Ltd on the other
part.
Statement of matter in dispute
The matter in dispute between the aforesaid parties iswhether the demand made by the Sri Lanka Nidahas Welan-da Ka Karmika Ayathana Sewaka Sangamaya (3rd respon-dent) on behalf of the workmen referred to therein for thepayment of gratuity and/or compensation from Messrs.Sheldons Ltd. (under liquidation) consequent to theclosure of business of Messrs. Sheldons Ltd. is justified, andif so, what quantum of gratuity and/or compensation thateach them should he paid.”
SHARVANANDA, J.—Latiff v. Fernando
*2
The 1st respondent thereafter issued summons on the partiesmentioned in the reference and proceeded to inquire into thesaid dispute. By letter dated 4.4.74, the 1st petitioner informedthe arbitrator that the financial position of Messrs. Sheldons Ltd.would not permit the payment of gratuity to the employees ashe had received claims from the company’s trade creditors,which themselves could not be settled in full for want of funds.He also furnished to the arbitrator a provisional statement ofthe affairs as at 27.7.73. In that statement ,the 1st petitionedreferred' to the liability in a sum of Rs. 143,585.00, alleged tobe due to trade creditors, but significantly omitted to clarifyas to what happened to the stock of rubber purchased on creditfor the said sum of Rs. 143,585.00.
After inquiry, by his order dated 31.7.74, the 1st respondentmade his award on the alleged industrial dispute between the3rd respondent-Union and the several workers on the one partand Messrs. Sheldons Ltd. (under liquidation) and Mr. A. A.Latiff (Chartered Accountant), liquidator of Messrs. SheldonsLtd., on the other part, whereby he directed the respondentsto the reference, viz. Messrs. Sheldons Ltd. (under liquidation)and Mr. A. A. Latiff (Chartered Accountant), liquidator ofMessrs. Sheldons Ltd., the petitioners in this Court, to depositwith the Assistant Commissioner of Labour the amounts dueto the workers, totalling Rs. 43,146.00, as indicated in his awsftd,within one month of the publication of the award in the Govern-ment Gazette. The award was published in the GovernmentGazette on 23.8.74.
By application dated 11.9.74, the petitioners have moved thisCourt for a writ of certiojari quashing the said award. At thehearing before us, Counsel submitted that there was no “ indus-trial dispute ” witfiing meaning of section 4 of the IndustrialDisputes Act between the 1st petitioner, viz. A. A. Latiff, liqui-dator of Messrs. Sheldons Ltd. and the workmen employed byMessrs. Sheldons Ltd. He stressed that the 1st petitioner was notthe employer of the workmen whose services were terminatedby the closure of the 2nd petitioner’s business and tfaat SheldonsLtd. was, for all relevant purposes, their employer. The followingsummarises basically his contention : —
‘Industrial dispute’ is defined in the Industrial DisputesAct to mean ‘ any dispute or difference between the employerand the workman ’. According to this concept, for a disputeto acquire the status or character of an industrial dispute,the parties thereto should be in the relationship of employerand workman. Section 4 of the Act (Chap. 131) vests theMinister with jurisdiction to refer for settlement by arbitra-tion only an ‘ industrial dispute ’. So that the Minister of
SKAXVANiCSBA, J-—LaUgv. Fernando83
Labour, when he makes a reference under section 4, couldname.as parties to an industrial dispute only the employerand the workmen, which includes the Trade Union which .represents them. Persons who do not stand in that relation-ship could not be made parties to such reference. Underthe reference in issue, the Minister could not have validlyincluded the 1st petitioner, A. A. Latifi (liquidator), as aparty to the industrial dispute between Sheldons Lid. (inliquidation) and its workmen. Notwithstanding the' com-pany going into voluntary liquidation, its corporate statussubsisted until dissolution, and the company remained .'theemployer of the ’workmen in spite of the 1st petitioner beingappointed the liquidator. Hence, there never existed anindustrial dispute between the workmen and liquidatorwhich could be the subject of reference under section 4 ofthe Act. The Minister of Labour exeeded his jurisdictionin including the 1st petitioner, viz. A. A. Latifi (liquidatorof Sheldons Ltd.), as a party to the industrial dispute thatexisted between the workmen and Sheldons Ltd. Sincethere was no industrial dispute between the said workmenand the 1st petitioner, the reference was pro ianto invalidand the 1st respondent lacked jurisdiction to proceed againstand make an award against the 1st petitioner.
On a proper appreciation of the status and function of theliquidator of a company in voluntary liquidation, it will appearthat Counsel’s submission is-well-founded.
Section 216 of the Companies Ordinance states that a companymay wind up voluntarily if the company resolves by specialresolution that the company be wound up voluntarily (membersvoluntary winding up), or if the company resolves by- extra-ordinary resolution to the effect that it cannot, by reason of itsliabilities, continue its business and that it is advisable to windup (creditors’ voluntary winding up).
According to section 218, a voluntary winding up shall be deemedto commence at the time of passing of the resolution for voluntarywinding up ; and section 219 provides that, in the case of avoluntary winding up, the company shall, from the commence-ment of the winding up. cease to carry on its business, except sofar as may be required for the beneficial winding up thereof,provided that the corpcwita state and corporate powers of thecompany shall, notwithstanding anything to the contrary in itsArticles, continue until it is dissolved. There is no change ofpersonality. Section 232(2) provides that in the case of a
***iSHAflV AN AND A, J.—Latijf v. Fernando
creditors’ voluntary winding up, .all the powers of the directorscease on the appointment of a liquidator, except so far as Uiecommittee of inspection, or ii there is no such committee, thecreditors sanction the continuance thereof. The liquidatorassumes all the functions of the directors, but in the performancethereof he is-charged with certain special statutory duties ofcollecting and realising the Company’s assets and discharging itsdebts and liabilities. Jt±e is given wide powers tor me purposeof winding up the company's affairs and distributing its assets.The property of the company does not vest in him ; tne companycontmues in existence tand he administers tne affairs of mecompany on behalf of the company. Before'a resolution to windup voluntarily is passed, the management of the company is inthe hands of is officers, tne directors ; aiter such a resolution, it isin the hands of its agent, the liquidator, and the company, actingby its agent, tire liquidator, carries out its obligations towaros nsemployees. Homer, J. in Knowles v. Scott, ^1891)1 Cn. rzi at723, said of a voluntary liquidator; “in my view, a voluntaryliquidator is more righciy described as tne agent of the company—an agent who has no doubt cast-upon him Dy statute or other-wise special duties, amongst which may be mentioned the dutyof applying the company’s assets in paying creditors® anddistributing the surplus among me share-holders.” He proceededto emphasise that the liquidator’s fiduciary duty is not toindividual creditors, but is to me creditors as a body. Section 229oi the Companies Ordinance sets out the powers and duties ofa voluntary liquidator. Section 239 (1) (b) read with section184 (1) (a) refers to the^power of the liquidator “ to bring ordefend any action or other legal proceeding in the name and onbehalf of the CompanyIf a liquidator conducts or defendslitigation in the company’s name, he is no more liable for costsawarded against the company any more than its directors werewhile it was a going concern. (Fraser v. The Province of BresciaSteam Tramways Co., (1887) 56 L.. T. 771). He is not a party tothe action personally ; he is not the litigant. The company (inliquidation) is the proper party to the litigation and not theliquidator, and it is the company which is liable on the contractsentered into on its behalf by the liquidator. The case of In rethe Anglo-Morovian Hungary Junction Railway Company,Ex-parte Watkin, (1875) L. It. Ch. D. 130, where the solicitorappointed by the liquidator was held to have no claim againstthe liquidator personally for the costs of the winding up,illustrates the point. In the course of his judgment, Mellish, L. J.(at- page 134) stated the law as: “In the case of a voluntarywinding up,- the liquidator is an officer of the company who acts
•S HAR'~ AXAXT) A. s.—Latiff v. Fernando
On
instead of the directors. He is no more personally liable forcontracts which he makes on behalf of the company than thedirectors would be for the contracts they make on behalf ofthe company. ” On this view o" the legal position, the liquidator,the 1st petitioner, cannot be personally liable for the obligationsof the company and no award under the Industrial Disputes Actcoiild have been made against him by the 1st respondent.
In reply to Counsel's submission that the reference toarbitration involving the liquidator was pro tanto bad in lawand that the arbitrator hac: no jurisdiction to proceed and makean award against the liquidator, Mr. Siva Hajaratnam contendedthat the petitioners never pretested against the assumption ofjurisdiction by the arbitrator and hence were precluded orestooned from making such a complaint in. this Court. Ke arguedthat the 1st petitioner- had, by participating in the proceedingsbefore the arbitrator, waived his objection. It is a fundamentalprinciple that no consent can confer a tribunal with limitedstatutory jurisdiction any power to act beyond the juris-diction which the law vests it with, or can preclude or estopthe consenting or acquiescing party from subsequently protest-ing against the assumption of such jurisdiction. Estoppel cannotenlarge the jurisdiction of a tribunal with limited■jurisdiction. Consent or lack of objection, such as alleged herecould not have conferred jurisdiction on the 1st respondent toproceed against or make an award against the liquidator on theindustrial dispute in question. The arbitrator, before taking stepson the reference, should have satisfied himself that it was intravires the Minister to make the reference in issue under section4 of the Industrial Disputes Act. The' 1st petitioner’s failure tcprotest to the arbitrator against his being improperly made aparty to the reference cannot enlarge the jurisdiction of thearbitrator so as to enable him to make an award against the 1stpetitioner personally. It is tc be noted that section 40(1) (c) ofthe Industrial Disputes Act makes it an offence for any personwho is bound by an award of an arbitrator to fail to comply withthe terms or conditions of that award. The award in the instantcase directs the petitioners, viz., the liquidator and the company,to deposit the sum of Bs. dS.l-iS. The 1st petitioner-liquidator runsthe risk of being prosecuted for failing to comply with the award.
In my view, the award against the 1st petitioner, viz. theliquidator, lacks any legal basis and is null and void. Thearbitrator had no legal authority to make such an award againstthe 1st petitioner. The application of the 1st petitioner for a
96SHARVANANDA, J.—Latiff v. Fernando
writ of certiorari to have the award made against him personallyquashed is allowed, and that part of the award dated 31.7.74 whichthe arbitrator made against the 1st petitioner, viz. the liquidatorof the 2nd petitioner-company, is annulled. The impugned partcan be severed from the award made against the company. Thisquashing of the invalid portion of the aforesaid award does not,however, affect the validity of the award made against the 2ndpetitioner, viz. Sheldons Ltd. (in liquidation). In the circumstan-ces, each party will bear his own costs of this application.
Samarakoon, C. J.—I agreeRatwatte, J.—I agree.
Award against 1st petitioner quashed.