2017 (10) TMI 463 - AT - Companies Law

Insolvency procedure - application under Section 9 of the I&B Code is maintainable at the instance of Workmen Association? - Held that - We hold that the application under Section 9 at the instance of Appellant-JK Jute Mill Mazdoor Morcha - is not maintainable. The Adjudicating Authority has rightly rejected the claim though for some other reason. It does not mean that an application under Section 9 of I&B Code is not maintainable at the instance of an individual employee/workman who has rendered services to the corporate debtor and if there is debt and default such individual workman/employee can prefer an application under Section 9 giving details of debt and date of default but it should not be less than one lakh rupees in view of Section 4 of the I&B Code. In such cases if corporate insolvency resolution process if started against the corporate debtor, it is always open to the other creditors, including workmen/employees, their legal heirs to file claim before the Insolvency Resolution Professional once notice is published in the newspaper under Section 15 of the I&B Code and/or prior to completion of insolvency resolution process. This observation we are making so that in such case the corporate debtor cannot take plea that earlier the application moved by workers association/Trade Union in respect of such workmen/employee/legal heirs of deceased employees under Section 9 and the appeal under Section 61 have been rejected. In absence of any merit the appeal preferred at the instance of JK Jute Mill Mazdoor Morcha is dismissed with liberty to individual workman/employee to raise such claim, if there is a debt and default.

Issues Involved:
1. Maintainability of an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 by a Workmen Association.
2. Definition and scope of 'Operational Creditor' under the I&B Code.
3. Pre-existing disputes and their impact on the maintainability of the application.
4. Procedural requirements for filing an application under Section 9 of the I&B Code.
5. The role and claims of interveners in the insolvency proceedings.

Issue-wise Detailed Analysis:

1. Maintainability of an application under Section 9 of the Insolvency & Bankruptcy Code, 2016 by a Workmen Association:
The primary question addressed was whether a Workmen Association can file an application under Section 9 of the I&B Code. The Tribunal concluded that the application under Section 9 at the instance of the Appellant - JK Jute Mill Mazdoor Morcha - is not maintainable. It was held that while individual workmen or employees who have rendered services to the corporate debtor can be considered 'operational creditors', a Trade Union or Workmen Association does not fall within this definition as they do not provide services directly to the corporate debtor.

2. Definition and scope of 'Operational Creditor' under the I&B Code:
The Tribunal examined the definitions under Section 5(20) and 5(21) of the I&B Code. It was determined that an 'operational creditor' is a person to whom an operational debt is owed due to the provision of goods or services, including employment. However, the Trade Union itself does not render any service to the corporate debtor and therefore cannot be considered an 'operational creditor'. The Tribunal emphasized that a workman or employee individually can be an 'operational creditor' if they have a claim due to services rendered.

3. Pre-existing disputes and their impact on the maintainability of the application:
The Tribunal noted that there were pre-existing disputes between the parties, including pending civil suits and writ petitions. It was highlighted that where there is a pre-existing dispute, as established in the case of "Kirusa Software Pvt. Ltd. v. Mobilox Innovations Pvt. Ltd.", an application under Section 9 is not maintainable. The Tribunal also mentioned that the Appellant had not provided the necessary certificate from a financial institution, which is a mandatory requirement under Section 9.

4. Procedural requirements for filing an application under Section 9 of the I&B Code:
The Tribunal reiterated that an application under Section 9 must be filed individually by the operational creditor and not jointly. Each workman or employee must issue an individual claim notice under Section 8 and provide detailed particulars of their claim, including the amount due, period of service, and date of default. The Tribunal referenced the case of "Uttam Galva Steels Limited V. DF Deutsche Forfait AG & Anr" to support the requirement for individual applications.

5. The role and claims of interveners in the insolvency proceedings:
The Tribunal acknowledged the claims of the interveners, who were members of different Trade Unions and legal heirs of deceased workers. These interveners claimed dues for wages, overtime, provident fund, gratuity, and other benefits. The Tribunal noted that each workman or employee has a separate cause of action, and their claims must be individually assessed. It was emphasized that once the corporate insolvency resolution process is initiated, other creditors, including workmen and their legal heirs, can file their claims before the Insolvency Resolution Professional.

Conclusion:
The Tribunal dismissed the appeal filed by JK Jute Mill Mazdoor Morcha, holding that the application under Section 9 was not maintainable at the instance of the Trade Union. However, it granted liberty to individual workmen or employees to raise their claims if there is a debt and default. The Tribunal also clarified that this decision does not preclude individual claims from being considered in future insolvency proceedings.

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