Receiver Assigned to Liquidate Assets of Dissolved Partnership Not Employer Under Industrial Law: Bombay High Court
Safiya Malik
The High Court of Judicature at Bombay, Single Bench of Justice Sandeep V. Marne held that a Court Receiver appointed to dispose of the assets of a dissolved partnership firm cannot be regarded as an “employer” under Section 25-O of the Industrial Disputes Act, 1947, for purposes such as continuing operations or seeking closure approval. The Court held that once the Receiver is appointed for the limited function of asset sale, the firm’s business effectively ceases to exist, and any direction to restart the factory or disburse wages lacks legal foundation. Setting aside the Industrial Court’s order directing payment of wages and reopening of the unit, the Court reaffirmed that dissolution of the firm brings its employment relationships to an end.
The matter arose from a petition filed by the Court Receiver of the Bombay High Court challenging an Industrial Court order directing payment of wages to factory workers and reopening of the establishment. The dispute concerned a partnership firm engaged in the manufacture and sale of edible oils under a well-known brand. Owing to disputes among its partners, one partner issued a notice of dissolution and filed a suit seeking dissolution of the firm and distribution of assets. Pursuant to the Court’s order, a Court Receiver was appointed to take possession of the firm’s business and properties and to oversee their sale.
The workers’ union filed a complaint before the Industrial Court alleging unfair labour practices after the factory gates were closed and wages discontinued from January 2002. The union sought payment of wages with interest and contended that no closure permission had been obtained under Section 25-O of the Industrial Disputes Act, 1947. The Court Receiver and some partners opposed the complaint, arguing that the partnership stood dissolved under Section 43 of the Indian Partnership Act, 1932, and that business operations had legally ceased, thereby negating the requirement of closure permission.
Evidence was produced regarding the firm’s operational halt, the Receiver’s appointment, and orders directing sale of assets. The Industrial Court held that the partnership continued to exist since the dissolution suit was pending and ordered the Receiver to reopen the factory and pay wages with interest. The Receiver challenged this order, asserting that his role was limited to selling the assets and not managing the business or acting as an employer under labour legislation.
Justice Sandeep V. Marne observed that “the short issue that arises for consideration is whether the undertaking of a partnership firm, which is sought to be dissolved and in respect of which a Court Receiver has been appointed for sale of its assets, needs a separate closure permission under Section 25-O of the ID Act.”
The Court stated that “the partnership in question was a partnership at will, and the partner who instituted the suit had issued notice of dissolution; therefore, the firm stood dissolved from the date of communication of such notice.” It further recorded that “the Court Receiver was appointed only to sell the assets of the partnership firm, and the orders of this Court never contemplated selling the business as a going concern.”
Addressing the Industrial Court’s reasoning, the Judge noted, “the position that obtained by January 2002 was that the Court Receiver was under orders to sell the assets of the partnership firm. The Receiver was never supposed to run the business himself nor was under direction to appoint any agent for that purpose.”
The Bench also referred to the precedent in Bombay Metropolitan Transport Corporation Ltd., observing that “where a company is ordered to be wound up, the winding-up order operates to dissolve the company and the services of employees come to an end by operation of law.” Applying the same principle, it recorded that “upon dissolution of the partnership firm, the business stands closed and the requirement of separate permission for closure under Section 25-O does not arise.”
The Court stated that “the Industrial Court erred in directing payment of wages and reopening of the factory when the firm had already been dissolved and its business discontinued by operation of law.”
It stated that “the judgment and order dated 27 February 2007 passed in Complaint (ULP) No. 434 of 2004 is set aside.” Justice Sandeep V. Marne directed that “the Court Receiver shall pay to each of the concerned workmen of the partnership firm closure compensation calculated at the rate of fifteen days’ wages for every completed year of service.”
“The respondent-union or concerned workmen shall lodge claims for closure compensation with the Court Receiver within four weeks.” It further directed that “the Court Receiver shall take assistance of the partners of the firm and the respondent-union to ascertain the years of service rendered and the last drawn wages of each workman as of December 2001 and determine and pay the compensation accordingly.”
“The Court Receiver shall also pay to each workman the amount of gratuity under the Payment of Gratuity Act, 1972, if not already paid, along with simple interest at six percent per annum from 1 January 2002 until payment.”
The Court stipulated that payment be made “within four months if sufficient funds are available; otherwise, the Receiver shall sell requisite assets with prior permission of the Court in Suit No. 4913 of 2000 to satisfy workers’ claims.”
“With the above directions, the petition is partly allowed and disposed of. Nothing survives in the interim application, Court Receiver’s report, or notice of motion.”
Advocates Representing the Parties
For the Petitioner: Mr. J.P. Cama, Senior Advocate with Mr. K.P. Anilkumar, Mr. Amit Saple, and Ms. Priyanka Kumar.
For Respondents: Mr. A.V. Bukhari, Senior Advocate, instructed by Mr. Kishorekumar Shetty, Mr. Z.A. Jariwala, instructed by Thakor Jariwala & Associates, Mr. Malcolm Siganporia with Ms. Pranita Saboo and Mr. Bhavin Shah, instructed by Mr. Dev Tejnani, Mr. Anand Pai, instructed by Mr. Sahil S. Sayed.
For the Interveners: Mr. Kiran Bapat, Senior Advocate with Mr. Sachin B. Thorat, instructed by Mr. Yogesh G. Thorat.
Case Title: The Court Receiver, High Court, Bombay v. Mumbai Labour Union & Ors.
Neutral Citation: 2025:BHC-OS:16785
Case Number: WP/2310/2007-FC
Bench: Justice Sandeep V. Marne
