2019 (3) TMI 308 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - outstanding workmen Debt - HELD THAT - Admitted position about the amount of workmen Debt is that their percentage is much less than 10% of the total Debt. As per the figures the Financial Creditors have lodged claim of ₹ 4264 Crore and Operational Creditors claim is approximately ₹ 6.6 Crore, however as against that, the employees/workmen claim is only ₹ 5.56 crores. As a consequence, since the claim of workmen is less than 10% of the total Debt therefore it was not necessary to issue Notice intimating the meeting of the Committee of Creditors to this Applicant. The Resolution Professional was not under obligation u/s 24 (3) (c) to give Notice of meetings of CoC. Since the statute itself do not subscribe issuance of Notice under a specific condition (i.e. 10% threshold) therefore now at this stage allowing hearing to this Applicant representing workmen may tantamount to infringement of the provisions of the Insolvency Code. It is true that Civil Rights are to be protected and natural justice ought to be granted, but while dealing Tax matters or Financial matters it sometimes happen that the Law of Equity is not bestowed upon uniformly. This Bench is aware about the judicial function while dispensing justice that opportunity of hearing must be granted to all who are going to be affected by a judgement and that the fundamental rights, such as Civil rights be protected. Therefore, in the process of Insolvency we have taken due cognizance of the problem of the labourers/ workmen, which shall be dealt with at the time of approval of the Resolution Plan pending for consideration. This Bench shall examine the financial capacity of the Resolution Applicant and also consider the proposed settlement with other Claimants and only thereafter shall decide a fair and reasonable amount be disbursed to the members of this Labour Union.

Issues Involved:
1. Whether the workmen of the Corporate Debtor can re-submit their claims to the Interim Resolution Professional.
2. Whether the Interim Resolution Professional/Resolution Professional should be impleaded as a party in the Industrial Court.
3. Whether the stakeholders, including workmen, are entitled to a right of hearing before the approval of the Resolution Plan.
4. Whether the recording of "satisfaction" as prescribed under Section 31(1) is an ex-parte proceeding against affected parties.

Issue-Wise Detailed Analysis:

1. Re-submission of Claims by Workmen:
The petition sought an order allowing workmen to re-submit their claims to the Interim Resolution Professional (IRP). The Tribunal noted that the workmen had already lodged their claims in January 2018 for the period up to December 2017. The Tribunal emphasized that the process of insolvency requires the IRP to call for claims from all stakeholders and that this process is not ex-parte. The claims are examined by the IRP and communicated to the Resolution Applicant, who may amend the plan accordingly. Thus, the Tribunal held that the workmen’s claims had been considered, and the resolution plan included provisions for payment of outstanding wages. Therefore, the prayer for re-submission of claims was acknowledged but deemed unnecessary as the claims had already been lodged and considered.

2. Impleading the IRP/Resolution Professional in Industrial Court:
The petition also requested that the IRP/Resolution Professional be impleaded as a party in the Industrial Court. The Tribunal noted that the Labour Commissioner had referred the dispute to the Industrial Tribunal and that the IRP had informed the Tribunal about the commencement of insolvency proceedings and the application of the moratorium under Section 14 of the Insolvency Code. The Tribunal emphasized that the objective of the moratorium is to provide a breathing space to the Corporate Debtor and to ensure that the insolvency resolution process is conducted smoothly without interference from other legal proceedings. Therefore, the Tribunal dismissed the prayer to implead the IRP/Resolution Professional in the Industrial Court, as it would interfere with the insolvency process.

3. Right of Hearing for Stakeholders:
The petition argued that stakeholders, including workmen, should be given the right to a hearing before the approval of the Resolution Plan. The Tribunal acknowledged that recording "satisfaction" under Section 31 of the Code is a judicial obligation that must be exercised with due care. However, the Tribunal clarified that the formulation of a Resolution Plan is not an ex-parte procedure. The IRP is required to call for claims from all stakeholders, and these claims are examined and considered. The Tribunal also noted that the workmen’s dues are given priority in the payment waterfall, next to the insolvency resolution process cost. Therefore, the Tribunal concluded that the workmen’s claims had been considered, and the resolution plan included provisions for their payment. The Tribunal held that the right to a hearing had been adequately addressed through the claims process, and there was no need for a separate hearing for the workmen before the approval of the Resolution Plan.

4. Recording of "Satisfaction" as an Ex-Parte Proceeding:
The petition argued that the recording of "satisfaction" under Section 31(1) is an ex-parte proceeding against affected parties. The Tribunal clarified that the recording of "satisfaction" is a judicial obligation that must be based on a thorough examination of the Resolution Plan and the claims submitted by stakeholders. The Tribunal emphasized that the process of insolvency is designed to be summary and efficient, and the IRP is required to consider all claims before finalizing the Resolution Plan. The Tribunal also noted that the workmen’s claims had been considered and that the resolution plan included provisions for their payment. Therefore, the Tribunal held that the recording of "satisfaction" was not an ex-parte proceeding, as the claims of the workmen had been duly considered.

Conclusion:
The Tribunal acknowledged the importance of protecting the rights of the workmen and ensuring that their claims are considered in the insolvency process. However, the Tribunal also emphasized the need for efficiency and expediency in the insolvency process. The Tribunal held that the workmen’s claims had been considered, and the resolution plan included provisions for their payment. Therefore, the Tribunal dismissed the prayers to re-submit claims, implead the IRP/Resolution Professional in the Industrial Court, and grant a separate hearing for the workmen before the approval of the Resolution Plan. The Tribunal directed that the necessary instructions in respect of prayer (a) be passed, but dismissed the rest of the prayers.

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