Chandrakantaraj Urs, J.
1. This appeal on the original side is preferred by the workmen of Saw Mill and Wood Working Factory of Madras Sapper Ex-Servicemen's Rehabilitation Association (for short MSERA) represented by the MSERA Employees Union (hereinafter referred to as 'Union').
2. MSERA is a Society registered under the Karnataka Societies Registration Act, 1960 with the object of promoting the welfare of Ex-Servicemen who could be rehabilitated by providing with employment in certain trade and occupation. The relevant portion reads as follows:
'Object for which the Association is established are all or any of the following sub-clauses (and in construing the following sub-clauses the scope of no one of such sub-clauses shall be deemed to limit or affect the scope of any other of such sub-clauses:
XXX XXX XXX(xiv) To carry on any trade or business or any manufacturing activity in the field of Civil, Mechanical, Electrical and General Engineering including lumbering, Saw Milling, Manufacture of Wood products, timber fabrication or other joinery or cabinet making work or any other allied products as well as to establish works including Founderers, Smiths, Mechanists, Welders, Artisans, Fabricators and manufacture of all kinds of tools, machinery, equipment, materials and goods incidental and ancillary thereto.'
3. The Company Petition No. 3/1986 was presented by six petitioners claiming to be creditors of the MSERA who was the 1st respondent in the Company Petition. The 2nd respondent was the General Manager of MSERA, M.E.G. Centre, Old Madras Road, Bangalore. At a later stage of proceedings, the Union of India and State of Karnataka impleaded themselves as supporting creditors. At yet another later stage of the petition, the appellant before us - the Union also impleaded itself to be heard in the matter.
4. We find from the order under appeal that the creditors debts themselves are not disputed by the respondents-MSERA. In fact, the management itself had closed down the work of the factory for various reasons long before winding up petition was presented. In that view of the matter, the creditors had no other alternative remedy and having regard to the large amount involved in realising the debts by normal procedure of filing a civil suit approached this Court for a winding up order inter alia on the ground that the respondent an unregistered company was unable to pay its debts.
5. In the beginning the 1st respondent - Company took up the stand that it did not fall within the definition of unregistered company occurring in Section 582 of the Companies Act (hereinafter referred to as 'the Act'). That was over ruled and the matter was proceeded with.
6. It was only after the preliminary objections was over ruled and the application of the petitioner was directed to be notified in the newspaper for information of general public, the Union came on record and filed a detailed statement of objections. Those objections have been noticed by the learned Company Judge in para-7 of his order. White not commenting on the various points urged by the Union he has noticed the fact that the liabilities set against the assets would still work out to Rs. 110,33 lakhs. Notwithstanding the allegation that the accumulated losses of the Company were due to mismanagement of the 1st respondent MSERA. One of the strong points urged before the learned Company Judge by the Union was that in consonance with the Directive Principles in the Constitution and to avoid loss of employment to the workmen who were in employment the Company, the winding up should not be made in the discretion of the Court. Weighing the argument advanced by the Union, the learned Company Judge took into consideration the heavy debt that was due to the petitioners-creditors and the fact that the Union of India as well as State of Karnataka which were original sponsors of the MSERA had themselves become supporting creditors in the petition and were seeking the winding up of the Company, the learned Judge relying upon the well settled principles obtaining in England as well as in this Country that winding up proceedings would be a legitimate method of realising the said debts due to the creditors from a Company proceeded to wind up the Company as debts themselves were not in dispute and inability of the MSERA to repay the debts was obvious.
Aggrieved by the same, the Union has preferred this appeal as already noticed.
7. Before us more or less the objections noticed by the learned Company Judge in para-7 of his order are reiterated with the addition that the Union may be permitted to question the preliminary finding recorded by the learned Company Judge that the MSERA was an association of persons answering to description of an unregistered company under Section 582 of the Act.
8. The thrust of the argument of Sri Rao appearing for the Union is that the composition as evidenced by Article 3 of the Articles of Association of the MSERA shows that it is the State within the meaning of Article 12 of the Constitution and therefore, it cannot be deemed to be an Association of persons under the Company's Act and therefore is not liable to be wound up.
9. We find it difficult to accept that argument having regard to the Memorandum of Association and the object for which the MSERA was incorporated and registered under the Karnataka Societies Registration Act, 1960. Merely because, there are some ex-officio Members nominated by the Central Government and some Members nominated by the State Government, the Society registered under the Karnataka Societies Registration Act is not ipso facto State or other Authority under Article 12 of the Constitution. The principle enunciated by the Supreme Court in AJAY HASIA'S case : (1981)ILLJ103SC are not attracted to the facts and constitution of the MSERA. In Ajay Hasia's case all the members of the Society happened to be the members of the Governments of the State of Jammu and Kashmir and the Union of India and State of Rajasthan. It was in that circumstance that the Court ruled it was an extension of the limb of the State and as such would answer to the description of 'the other authorities' under Article 12 of the Constitution.
10. We see under Article 3 of the Article Association, the membership of the Society is open to the persons nominated to the Board of Directors by the Ministry of Defence and by the Government of Karnataka. As per Article 5, they shall be deemed to be Members of the Association. Ex-officio Members mentioned in Article 5 shall be deemed to be Members of the Board of Directors. All ex-servicemen, Members of the Armed Forces, permanent Members of the General Public and Civilian Government servants, whose inclusion in the opinion of the Board of Directors will be beneficial to the advancement of the aims and objects, shall on application, be eligible and become Members of the Association, subject to the approval of the Board of Directors. Therefore, when once membership is open to the persons other than the State of Karnataka and the Central Government, then, it will lose the characteristic of being a local authority and remain only an association of persons in which Government has some interest. In fact, no material is placed before us to show that ex-servicemen do not constitute majority of members.
11. However, it was argued by Mr. Rao that no membership fees are charged and therefore, there are no members at all. We do not think that plea can be accepted by this Court. The membership may be on payment of fee or may be free and that will depend on the agreement reached by the members. The payment of fee is not a necessary ingredient to qualify the membership of the Association.
12. In that view of the matter, we must reject the argument of Mr. Rao that MSERA is a State within the meaning of that expression in Article 12 of the Constitution and therefore, it is not liable to be wound up.
13. An attempt was made to induce this Court to accept the contention advanced by the learned Company Judge that there was feasibility of rehabilitating MSERA and making it a paying proposition in order to see that the employees continue to be secured by the employment. That may be done even after the winding up order is made, if an appropriate scheme is promulgated either by the Union or any other person interested in rehabilitating MSERA the Company in liquidation. If such a scheme is forthcoming it could be placed before the Official Liquidator and he shall examine the same and obtain appropriate orders from this Court on such recommendations as he may deem fit to make in that behalf.
14. Therefore, we do not see any merit in this appeal. As such, we reject the same. We have not adverted to all the arguments advanced on all the points raised by Sri Rao as they were not germane to the issues raised in the Company Petition.
Appeal is dismissed.