10 January 2025 Bankruptcy & Insolvency Law >> Business & Commercial Law  

An appeal filed by a Workers' Union against an order of the Adjudicating Authority dated July 1, 2024, has been dismissed. The appeal challenged the Resolution Professional's decision to admit a claim of Rs. 1,85,62,360/-, which was less than the Union's initial claim of Rs. 3,14,31,360/-. The core of the dispute revolved around the computation of workers' salaries during a layoff period that commenced on July 31, 2021, prior to the Corporate Debtor's Corporate Insolvency Resolution Process (CIRP) on May 12, 2022.

Background:

The Corporate Debtor had issued a 45-day layoff notice on July 31, 2021, which was subsequently extended as work did not resume. After the CIRP began, the Workers' Union filed a claim for Rs. 3,14,31,360/-. The Resolution Professional, however, admitted a claim of Rs. 1,85,62,360/-. Despite a directive from the Adjudicating Authority to re-examine the claim, the Resolution Professional reaffirmed the initial admitted amount. The Union's subsequent application challenging this decision was rejected by the Adjudicating Authority.

Arguments and Decision:

The Workers' Union argued that the layoff was illegal under the Industrial Dispute Act, and therefore, workers should have been entitled to full salary until the insolvency commencement date.

However, the Adjudicating Authority, in its order, stated that the issue of whether workers are entitled to dues for the layoff period, being a pre-CIRP matter, falls outside its jurisdiction under Section 60(5) of the IBC. It cited a High Court of Kerala judgment, emphasizing that while a moratorium under Section 14 of the IBC prevents enforcement of demands, it does not prevent the determination of the quantum of dues by appropriate authorities under relevant laws.

The Tribunal affirmed this position, referencing its own previous judgment in "Era Labourer Union of Sidcul, Pant Nagar, through its Secretary Vs. Apex Buildsys Ltd." This precedent established that challenges to pre-CIRP layoff or closure notices are not within the Adjudicating Authority's purview, as such matters fall under industrial dispute laws.

Consequently, the appeal was dismissed, with the Tribunal concluding that the Resolution Professional's non-computation of salary after the layoff period was not erroneous, given that it lacks adjudicatory jurisdiction over such matters. The Tribunal clarified that the Workers' Union remains free to pursue other legal remedies available to them.

Section 14, INSOLVENCY AND BANKRUPTCY CODE - 2016  

INSOLVENCY AND BANKRUPTCY CODE, 2016