Employee can file winding-up petition for dues: MP high court

For the first time, a full bench of Madhya Pradesh High Court has held that employees can move court to wind up a company in order to recover dues which include their salary and emoluments.

For the first time, a full bench of Madhya Pradesh High Court has held that employees can move court to wind up a company in order to recover dues which include their salary and emoluments.

With this order, the full bench (comprising three judges) has overturned the order passed by single bench earlier.

The bench headed by MP High Court Chief Justice A M Khanwilkar has passed the order in response to a company petition filed by Singapore resident Jonathen Allen against Indore-based company Zoom Developers Pvt Ltd, alleged to be one of the country’s highest bank defaulters about whom Reserve Bank of India and financial intelligence agencies had alerted the centre early this year.

“We hold that employees of the Company has locus to file company petition in respect of his unpaid wages/salary and emoluments, as having been filed by creditor of the Company,” the bench of Chief Justice A M Khanwilkar, Justice Shantanu Kemkar and Justice J K Maheshwari remarked in a recent order.

Promoted by local resident Vijay Choudhary, Zoom Developers Pvt Ltd had engaged petitioner Jonathen Allen in 2008 to look after company’s asset management business in Singapore on gross annual salary of Singapore $ 650,000.

However, the company failed to pay his monthly salary after March 2009 citing financial constraints. When he resigned in September 2009, his dues stood at Singapore $ 879,211.67 (Rs 3.69 crore). Aggrieved, he moved court for issuance of company’s winding-up order to get his dues.

In this case, the question before MP High Court was to decide whether unpaid wages/salary of employee can be covered within the meaning of debts under Section 433 (e) of Companies Act, 1956, and the view taken by single bench earlier.