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Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman under clause (b) of section 25-F shall not exceed his average pay for three months. Explanation. - An undertaking which is closed down by reason merely of -
(i) financial difficulties (including financial losses); or
(ii) accumulation of undisposed of stocks; or
(iii) the expiry of the period of the lease or licence granted to it; or

8. Under the proviso to section 25-FFF(1) of the Industrial Disputes Act, if the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation payable to the workman shall not exceed his average pay for three months. The applicant herein was a worker of the company in liquidation as on the date of the winding up order and hence he is entitled to claim closure compensation under section 25-FFF of the Industrial Disputes Act, 1947.

9. In adjudication proceedings before the official liquidator in respect of the applicant's claim and claims of other workers, a question that arose for consideration was whether the undertaking of the company in liquidation was closed down on account of unavoidable circumstances beyond the control of the employer. In the instant case, the undertaking of the company in liquidation was closed down with effect from October 27, 1978, consequent on the passing of the winding up order. The learned official liquidator, in view of the judicial pronouncement in Palai Central Bank Employees' Union v. Official Liquidator, Palai Central Bank Ltd. [1965] 35 Comp Cas 279; [1965] II Comp LJ 110, by a Division Bench of the Kerala High court, came to the conclusion that the passing of a winding up order resulted in the closing down of the undertaking and hence the closure is due to unavoidable circumstances beyond the control of the company in liquidation and consequently restricted the claim of the workmen for closure compensation to the extent provided in the proviso to section 25-FFF(1) of the Industrial Disputes Act not only to the applicant herein but also to the other claimants/workers who were in the employment of the company in liquidation on the date of passing of the winding up order. In this connection, it is relevant to refer to the judgment of the Kerala High Court (Division Bench), which held that a closure under a winding up order is closure on account of unavoidable circumstances beyond the control of the employer. Following the Division Bench of the Kerala High court, the learned official liquidator came to the conclusion as stated above.

"In all cases of claims for compensation, the only important issue which arises for decision having regard to the provisions in section 25-FFF would be whether the undertakings were closed down on account of unavoidable circumstances beyond the control of the employers. The answer to that question would depend upon diverse circumstances. Petitions for winding up in most cases would be based upon the failure of the companies to discharge their debts in the due course of business. In almost all cases, such failure would necessarily result in winding up orders. The winding up orders in such cases must be considered the result of financial difficulties of the companies and/or inability of the companies to discharge all their debts in due course of business. In most cases, it would be impossible to make a finding that, because the court has intervened and passed a winding up order, the closure of the undertaking is due to or on account of unavoidable circumstances beyond the control of the employers. On the contrary, in those circumstances, the appropriate finding would be that the financial difficulties were in fact the result of the companies' usual trading activities and were not on account of unavoidable circumstances beyond the control of the companies. It is clear that diverse and different facts would have to be examined if the companies raise the question that their undertakings were closed down on account of "unavoidable circumstances beyond the control of the employer". The mere fact that, under section 445(3) of the Companies Act, employment of employees stands terminated as a result of a winding up order cannot and does not justify the conclusion that the undertaking of the company was closed down on account of unavoidable circumstances beyond the control of the employer."

29. Of the two decisions of the High Courts referred to above, one in Palai Central Bank Employees' Union v. Official Liquidator, Palai Central Bank Ltd. [1965] 35 Comp Cas 279; [1965] 2 Comp LJ 110 (Ker) and the other in Shree Madhav Mills Ltd., In re, , I am inclined to accept the view of the learned single judge of the Bombay High Court in preference to that of the Division Bench of the Kerala High Court.

30. The company in the instant case was ordered to be wound up pursuant to a petition for winding up failed by a creditor of the company. Hence, the root cause for the closure was the undischarged debts of the company which is due to the financial difficulties of the company. The Explanation to the proviso the sub-section (1) of section 25-FFF of the Industrial Disputes Act specifically provides that the closure of an undertaking due to financial strain, etc., shall not be deemed to be due to unavoidable circumstances beyond the control of the employer. Hence, I am of the opinion that, in the instant case, though the closure of the company was pursuant to an order of winding up of court, it cannot be held to be due to unavoidable circumstances beyond the control of the employer. The closure was due to the inability of the company to pay its debts. This cannot be considered to be an unavoidable circumstance. The situation could have well been averted had the company acted prudently.