NCLT Is Not Right Forum To Decide Whether Closure Of Factory Under Industrial Dispute Act Was As Per Law: NCLAT

In this case, the claim of the workers rejected by the liquidator was upheld because no evidence was presented to show that they were employees of the corporate debtor from the date of closure of factory till liquidation commencement date.

Brief Facts

The CIRP of the Corporate Debtor commenced vide order dated 01.01.2018 passed by the Adjudicating Authority on an application filed under Section 7 by the Allahabad Bank against the Corporate Debtor- 'Biotor Industries Ltd.'. On an application filed by the Resolution Professional, an order dated 31.12.2018 was passed by the Adjudicating Authority directing for liquidation of the corporate debtor. Liquidator made publication inviting claims from the stakeholders.

The Appellants in their capacity as Authorised Representative of 271 workmen submitted their claims in Form F vide e-mail dated 07.02.2019. Liquidator vide e-mail dated 25.02.2019 asked the Appellants to submit the proof of employment in the company in the period of two years preceding the liquidation commencement date in order to admit their claims. The liquidator vide e-mail dated 02.03.2019 communicated the rejection of the claims.

Aggrieved by the rejection of the claims by the liquidator, Appellant filed MA No.1847 of 2019 before the Adjudicating Authority. Adjudicating Authority after hearing the Appellants as well as the liquidator has passed the impugned order rejecting the claims. Appellants aggrieved by the said order has come up in this Appeal.

Contentions

The appellants submitted that even though the corporate debtor has ceased to do business from June, 2010, the closure of factory was not in compliance with the provisions of the Industrial Dispute Act, 1947. The workmen shall be deemed to be continuing and entitled for all benefits including wages till the date of commencement of liquidation.

That Liquidator has wrongly restricted the look back period to two years preceding the liquidation commencement date. Workmen are to be treated as employees of the corporate debtor and no salary slip was required to be proved by the Appellants.

Per contra, the respondents submitted that the factory ceased to work from June, 2010 and according to own case of the Appellant, they have not worked in the factory from April 2012. Liquidation Commencement Date being 31.12.2019, there is no material submitted before the liquidator to establish that the workmen on whose behalf the claims were filed were in the employment on the date of commencement of the liquidation.

That liquidation Commencement Date being 31.12.2019, there is no material submitted before the liquidator to establish that the workmen on whose behalf the claims were filed were in the employment on the date of commencement of the liquidation.

That Insofar as the submissions of the Appellants alleging violation of the provisions of the Industrial Dispute Act, 1947, it was open for the workmen to raise dispute and claim under the Industrial Dispute Act which having never been raised, it is not open for the Appellants to claim any entitlement in the liquidation proceedings of the corporate debtor which commenced on 31.12.2018.

NCLAT's Analysis

The tribunal after going through the record of the case noted that in the present case, according to own case of the Appellants that they could not work after April, 2012. They had not taken any proceedings before the Industrial Court or Labour Court for their wages and other claims. For violation of provisions of the Industrial Disputes Act, 1947, the remedy available to the workmen was to approach the Industrial Court or Labour Court.

The tribunal agreed with the findings of the Adjudicating Authority wherein it was observed that the workers/employees have slept over their rights for years together and have woken up all of a sudden out of their slumber only when the Corporate Debtor went into CIRP and eventually into liquidation. 'Vigilantibus non dormientibus jura subveniunt' is a well settled proposition of law which means that the law comes to the aid of those who are vigilant and not the indolent, who sleep over their rights.

The tribunal further addressed the contention that closure of factory was not in accordance with the Industrial Dispute Act therefore it was not a valid closure in the eyes of law.

The tribunal noted that the NCLT while exercising its jurisdiction on the liquidation process of the corporate debtor is not entitled to enter into issue as to whether the closure of the factory from June 2010 was in violation of the Industrial Dispute Act, 1947. The said issue ought to have been raised by the Appellants before the Industrial Court or Labour Court.

The tribunal to buttress its conclusion further relied on its own judgment in Era Labourer Union of Sidcul, Pant Nagar, through its Secretary vs. Apex Buildsys Ltd.,2024 wherein the same question came for consideration before the tribunal.

The tribunal in the above case observed 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.

The tribunal noted that the above judgment squarely applies to the facts of the present case because in this case also the issue of similar nature has been pressed.

The tribunal concluded that the issue of closure of the factory from June, 2010 cannot be questioned and the issue which ought to have been raised by the Appellants before the Industrial Court or Labour Court. Before the liquidator, no material having brought by the Appellants to prove their employment and working till 31.12.2018, the Liquidator did not commit any error in rejecting the claims. Adjudicating Authority after considering all submissions of the parties has rightly dismissed the M.A. No. 1847 of 2019.

Accordingly, the present appeal was dismissed.

Case Title: Rakesh J Shah & Ors. Vs. Sanjay Kumar Agarwal & Ors.

Case Reference:Company Appeal (AT) (Insolvency) No. 1490 of 2024

Judgment Date: 22/11/2024

For Appellants: Mr. Bishwajit Dubey, Mr. Anuj Tiwari, Mr. Kaustaubh Rai, Mr. Karan Khetani, Mr. Vinay Patil, Mr. Girijapati Kaushal. Ms. Aroshi Pal and Ms. Monika, Advocates.

For Respondents: Ms. Yahya Batatawala, Advocate for R1.

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