Bombay High Court Rules on Workers’ Rights Amid Partnership Firm Dissolution

Court Receiver Directed to Compensate Workers for Closure and Gratuity Following Dissolution of Ahmed Oomarbhoy Firm

In a significant ruling, the Bombay High Court addressed the complexities surrounding the dissolution of a partnership firm and its implications on workers' rights. The court reviewed a petition filed by the Court Receiver of the High Court, who was appointed during the dissolution of the partnership firm M/s Ahmed Oomarbhoy, known for its 'Postman' brand of edible oils.

The core of the legal battle was the closure of the firm's business, which left hundreds of workers without employment. The Industrial Court had previously ruled that the firm engaged in unfair labor practices, ordering payment of wages to workers from January 2002 and directing the reopening of the factory. However, this was challenged by the Court Receiver, arguing that the firm’s dissolution negated the requirement for a formal closure order under the Industrial Disputes Act, 1947.

Justice Sandeep V. Marne, while setting aside the Industrial Court's order, clarified that the dissolution of a partnership firm at will, coupled with the court’s directions to sell the firm's assets, constituted a closure of business. Therefore, a formal closure order under Section 25-O of the Industrial Disputes Act was deemed unnecessary.

Despite overturning the Industrial Court’s decision, the High Court emphasized the need to mitigate the impact on the workers. The ruling directed the Court Receiver to pay closure compensation equivalent to 15 days' wages per completed year of service and ensure the payment of statutory gratuity under the Payment of Gratuity Act, 1972, along with a 6% annual interest from January 2002 until payment.

The judgment underscores the court's recognition of workers' rights amidst complex legal proceedings involving business closures and highlights the judicial balance between procedural requirements and equitable relief.

Bottom Line:

Dissolution of a partnership firm and its impact on workers' rights under the Industrial Disputes Act, 1947, and Payment of Gratuity Act, 1972 - Court Receiver's liability to pay closure compensation and gratuity to workers.

Statutory provision(s): Industrial Disputes Act, 1947 Section 25O, Payment of Gratuity Act, 1972, Partnership Act, 1932 Section 43

Court Receiver High Court, Bombay v. Mumbai Labour Union, (Bombay) : Law Finder Doc Id # 2786344