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2024 (9) TMI 1323 - AT - IBCChallenge to closure of factory - validity of closure notice - jurisdiction of Adjudicating Authority to adjudicate upon the closure - HELD THAT - After the order dated 08.08.2019, matter was placed before the CoC in the meeting held on 02.09.2019 in which meeting the issue was left for the Resolution Applicant to take a call and thereafter the CoC to look into. However, no Resolution Plan having been approved, the liquidation was subsequently directed on 09.01.2020. There was no determination with regard to notice dated 31.07.2017 - the Adjudicating Authority has not taken any decision and has not expressed any view that the Adjudicating Authority has jurisdiction to adjudicate the notice dated 31.07.2017. What is recorded in the order is the statement made by the Resolution Professional. Hence, the order dated 08.08.2019 cannot be read to be determination by the Adjudicating Authority of its jurisdiction to pronounce on the closure notice. It is well settled that after initiation of the CIRP all claims against the corporate debtor has to be filed and examined in the CIRP/ Liquidation Process. It has also come on the record that after liquidation proceedings, the claims were also filed by the Appellant before the liquidator and the liquidator has admitted their claims to the extent of Rs.1,09,70,698.27/-. The direction of the High Court dated 27.04.2019 cannot be read to mean that High Court adjudicated the issue as to whether NCLT can examine the challenge to the closure notice dated 31.07.2017. The order of the High Court, thus, has to be read to mean that Appellants were given liberty to raise their claims in the proceedings before the NCLT and raise all contentions. The mere fact that liberty was granted by the High Court to file claim and raised all contentions cannot be read to mean that High Court has adjudicated and directed that the closure notice dated 31.07.2017 be also adjudicated by the NCLT. From liberty to raise all contentions and issues are not akin to any direction or adjudication that issue pertaining to challenge to the closure notice has to be undertaken by the NCLT. The above order of the Hon ble Supreme Court does not in any manner support the submission of the Appellant that NCLT has to adjudicate on the closure notice dated 31.07.2017 - neither of the judgment of the High Court of Uttarakhand or the Judgment of the Hon ble Supreme Court can be read to mean that after an adjudication, the High Court or the Supreme Court has held hat question of closure of notice dated 31.07.2017 has to be examined and adjudicated by the NCLT. The judgment of the Hon ble Supreme Court in Embassy Property Developments Pvt. Ltd. vs. State of Karnataka 2019 (12) TMI 188 - SUPREME COURT also throws considerable light on the jurisdiction which can be exercised by the NCLAT under Section 60(5). In the aforesaid case, with regard to mining lease which was granted to the corporate debtor notice of premature termination was issued by Government of Karnataka. Government of Karnataka subsequently rejected the proposal for extension of the lease. The Resolution Professional filed an application before the NCLT, Chennai Bench praying for setting aside the order of the Government and seeking declaration that lease should be deemed to be valid after 31.03.2020. NCLT, Chennai had allowed the application setting aside the order of the Government of Karnataka. It is clear that the closure/lockout notice which was issued on 31.07.2017 much prior to initiation of the CIRP and the closure and lockout notice was nothing to do with the CIRP process. Challenge to the closure and lockout notice cannot be raised before the Adjudicating Authority who is not competent to adjudicate the said issue which arises out of the provision of the Uttar Pradesh Industrial Disputes Act, 1947. Hence, the Adjudicating Authority did not commit any error in not entertaining the challenge to the closure notice dated 31.07.2017. Thus, no error has been committed by the Adjudicating Authority in rejecting the application filed by the Appellant where Appellant has sought to challenge the closure dated 31.07.2017 and transfer order dated 20.06.2017 - there are no merit in the Appeal - appeal dismissed.
Issues Involved:
1. Jurisdiction of the Adjudicating Authority to adjudicate the closure notice dated 31.07.2017. 2. Legality of the closure notice dated 31.07.2017 and transfer order dated 20.06.2017. 3. Admission and verification of the Appellant's claim by the liquidator. Issue-wise Detailed Analysis: 1. Jurisdiction of the Adjudicating Authority to adjudicate the closure notice dated 31.07.2017: The Adjudicating Authority concluded that it does not have jurisdiction to adjudicate the legality of the closure notice dated 31.07.2017 issued by the corporate debtor under the Uttar Pradesh Industrial Disputes Act, 1947, as it was issued much prior to the initiation of the Corporate Insolvency Resolution Process (CIRP). The Tribunal emphasized that the closure notice is unrelated to the insolvency process and thus cannot be adjudicated by the Adjudicating Authority. This position aligns with precedents set by the Hon'ble Supreme Court, which clarified that the NCLT's jurisdiction under Section 60(5)(c) of the IBC is broad but does not extend to matters unrelated to insolvency proceedings, such as public law decisions or actions under different statutory frameworks like the Uttar Pradesh Industrial Disputes Act, 1947. 2. Legality of the closure notice dated 31.07.2017 and transfer order dated 20.06.2017: The Appellant argued that the closure notice and the transfer order were illegal and non-est. However, the Tribunal noted that the High Court of Uttarakhand and the Hon'ble Supreme Court had not adjudicated on the legality of the closure notice but merely directed the Appellant to raise all contentions before the NCLT. The Tribunal reiterated that the closure notice dated 31.07.2017, issued under the Uttar Pradesh Industrial Disputes Act, 1947, is outside the purview of the NCLT's jurisdiction. The Tribunal also observed that the transfer order dated 20.06.2017 had not been held illegal by any competent authority, and therefore, it could not entertain challenges to these orders. 3. Admission and verification of the Appellant's claim by the liquidator: The Appellant's claim for wages and bonus was partly admitted by the liquidator, who accepted an amount of Rs.1,09,70,698.27/-. The Appellant contested the non-verification of claims post-closure, arguing that the liquidator had previously admitted these claims on a contingent basis. The Tribunal held that the liquidator's inability to verify claims due to the cessation of operations at the Pant Nagar unit post-closure was valid. The Tribunal referenced the principle from "Mohinder Singh Gill" that no new reasons could be given by a statutory authority to support its decision but found that the Adjudicating Authority was justified in its reasoning. The Tribunal affirmed that the liquidator's decision to not accept claims for periods after the closure was lawful and that the Adjudicating Authority did not err in its judgment. Conclusion: The Tribunal dismissed the appeal, affirming that the Adjudicating Authority correctly rejected IA No. 2545 of 2021. The Tribunal upheld the view that the NCLT lacks jurisdiction to adjudicate the closure notice and transfer order, and that the liquidator's partial acceptance of the Appellant's claim was appropriate given the cessation of operations post-closure. The Tribunal's decision aligns with established legal principles and precedents regarding the scope of the NCLT's jurisdiction and the verification of claims in insolvency proceedings.
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