2021 (10) TMI 711 - Tri - Insolvency and Bankruptcy

Admission of various claims - appointment under the category of Contract of Service or Contract for Service - Section 42 of Insolvency Bankruptcy Code, 2016 - HELD THAT - The appellants filed their claim in Form E even though the Liquidator directed them to file the claim in Form C, stating that they are not Operational Creditors. In this respect the Tribunal consider it necessary to see whether the appellants being consultant doctors of the corporate debtor comes under the purview of workmen? In order to verify whether the appellants are paid salary and whether the T.D.S was made, vide order dated 02.08.2021 the appellants were directed to produce the acknowledgement of IT returns showing the income and the tax paid by them during their engagement with the Corporate Debtor. However, the appellants have not produced the same. The learned counsel appearing for appellants could not properly answer why these documents could not be produced. In the cases on hand, the Appellants could not prove that they are full-time employees of the Corporate Debtor and their names entered in the muster rolls of the Corporate Debtor as Employee . A perusal of the appointment letters annexed with the appeals, it is discernible that the Appellants are appointed as Consultant Doctors for a fixed remuneration and they are acting as Consultants of the Corporate Debtor. In the appointment letter it is agreed between the parties that the tax shall be deducted from the payment of the doctors. It is also seen that the appellants were not registered as a part of corporate debtor s Employee Provident Fund Scheme and no agreement to show that provident fund can be deducted from their professional fees - they cannot be considered as workmen/ employees of the Corporate Debtor, as rightly decided by the Liquidator. There are no error in the impugned order passed by the Liquidator - appeal dismissed.

Issues involved:
- Classification of appellants as workmen/employees under Section 42 of Insolvency & Bankruptcy Code, 2016
- Determination of claims of appellants by Liquidator
- Dispute regarding the category of appellants as Operational Creditors
- Interpretation of the Industrial Disputes Act, 1947 in relation to the status of workmen
- Consideration of evidence to establish the status of appellants as workmen/employees

Analysis:

Issue 1: Classification of appellants as workmen/employees under Section 42 of Insolvency & Bankruptcy Code, 2016
The appellants, who were workmen/employees of the Corporate Debtor, filed appeals under Section 42 of the Code challenging the Liquidator's decision partially admitting their claims. The appellants contended that they were workmen and sought various reliefs, including the classification as workmen and full adjudication of their claims. However, the Liquidator treated them as Operational Creditors, leading to a dispute over their classification.

Issue 2: Determination of claims of appellants by Liquidator
The Liquidator, in response to the claims filed by the appellants, partially allowed the claims on 23.07.2020. The appellants argued that the Liquidator failed to provide reasons for rejecting certain components of their claims, as required by Section 40 of the Code. The Liquidator's decision was challenged based on the lack of explanation for the partial admission and rejection of claims, indicating a failure to fulfill obligations under the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

Issue 3: Dispute regarding the category of appellants as Operational Creditors
The Liquidator categorized the appellants as Operational Creditors and directed them to file claims in Form C, while the appellants submitted claims in Form E. The dispute arose from the classification of the appellants as Operational Creditors, with the appellants arguing that their status as consultant doctors should not lead to such categorization. The Liquidator defended the classification based on the nature of the appellants' appointments and the professional relationship with the Corporate Debtor.

Issue 4: Interpretation of the Industrial Disputes Act, 1947 in relation to the status of workmen
The Tribunal delved into the definition of "workman" under Section 2(s) of the Industrial Disputes Act, 1947 to determine whether the appellants qualified as workmen/employees. The Act defines a workman as any person employed to do various types of work for hire or reward, with exceptions for certain categories of employees. The dispute centered on whether the appellants, as consultant doctors, fell within the scope of workmen under the Act, considering their roles and employment terms.

Issue 5: Consideration of evidence to establish the status of appellants as workmen/employees
To ascertain the status of the appellants as workmen/employees, the Tribunal directed them to produce evidence, including IT returns showing income and tax paid during their engagement with the Corporate Debtor. However, the appellants failed to provide the required documentation, leading to challenges in establishing their employment status. The Tribunal examined appointment letters and agreements to determine the nature of the appellants' relationship with the Corporate Debtor and concluded that they were consultants, not employees, based on the lack of certain employment indicators.

In the final judgment, the Tribunal dismissed the appeals, upholding the Liquidator's decision and finding no error in the classification of the appellants as consultants rather than workmen/employees of the Corporate Debtor. The decision was based on the examination of evidence, including appointment letters and absence of employment contracts, supporting the conclusion that the appellants did not meet the criteria to be considered workmen under the Industrial Disputes Act, 1947.

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