NCLAT New Delhi: Workers' Claim Through Sub-Contractor Can't Be Treated On Par With Corporate Debtor's Workmen

The National Company Law Appellate Tribunal ('NCLAT'), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member), and Arun Baroka (Technical Member) held that the Claim of workers employed through sub-contractor filed through sub-contractor as Operational Debt cannot be treated as workmen of Corporate Debtor.

Background Facts

The Appeal has been filed against the NCLT New Delhi's order dated 21.08.2023 approving the Resolution Plan submitted by Ramkrishna Forgings Limited.

The Union of Workers (Appellants) constituting workers engaged by a sub-contractor claimed that their claims in the Resolution Plan have been accepted only to the extent of 8% whereas workmen of JMT Auto Ltd. (Corporate Debtor) have been proposed payment of 100% of their claim.

Contentions of the Appellants:

The Appellants contended that they have been working in the units of the Corporate Debtor and are entitled to payment of their full wages including provident fund and gratuity etc. However, the Resolution Plan only proposes 8% of such dues as opposed to the claims of the workmen of the Corporate Debtor have accepted 100% of their claims.

Further, they argued that there is no difference between workmen who are employed directly by the Corporate Debtor and workers who are engaged through sub-contractors, both having been performing the same duties and are entitled to the same emoluments. If Section 3(36) of the Insolvency and Bankruptcy Code, 2016 ('IBC') reads with Section 2(s) of the Industrial Dispute Act, 1947, the regulation does not make any difference between workers and sub-contracted workers. It was due to inadvertence that claims were submitted in Form B instead of Form D or E which was inconsequential.

Appellants also contended that they are also stakeholders and a harmonious interpretation of the statute needs to be given to extend benefit to the sub-contracted workers also. Their Statutory dues cannot be forsaken in the Resolution Plan.

NCLAT Verdict:

The NCLAT New Delhi Bench dismissing the appeal held that none of the claims in the Corporate Insolvency Resolution Process ('CIRP') have been filed by any of the Appellants and the sub-contractor had filed the claims as 'operational debt' on their behalf as operational creditors. Thus, the Resolution Plan also dealt with them as 'Operational Creditors'.

The Appellate Tribunal pointed out that no dispute exists for the statutory definition of workmen under the Industrial Dispute Act, 1947 and that adopted by Section 3(36) of the IBC. However, the Appellants who never submitted any claim before the Resolution Professional claiming to be workmen cannot be allowed to contend at this stage that they are workmen and should be paid at par with the workmen of the Corporate Debtor for an amount that was admitted in the CIRP by the Resolution Professional.

It also observed that the treatment of such operational debt cannot be faulted on the anvil of Section 53 of the IBC which itself provides different treatment in the distribution of assets where workmen dues are dealt with in Section 53(1)(b) and operational debt at much lower ladder. The Resolution Plan has also similarly dealt with workmen's dues differently from operational debt and the admitted workmen's dues and admitted operational debt cannot be faulted in the Resolution Plan. Thus, a claim filed by an operational creditor cannot be treated at par with a claim of workmen. When the Resolution Plan differentiates between payment to the workmen as well as to the Operational Creditors, such distinction is as per law and cannot be faulted.

NCLAT placed reliance on the Supreme Court's decision in Committee of Creditors of Essar Steel India Limited Through Authorised Signatory vs. Satish Kumar Gupta & Ors. wherein it was held that equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational.

NCLAT also refused to entertain the Appellant's contention stating that they were unaware of the CIRP and could not file their claim since all the claims have been collated and admitted and dealt with in the Resolution Plan.

In conclusion, the NCLAT dismissed the appeal and upheld the order of NCLT New Delhi approving the Resolution Plan. It observed that the Resolution Plan has dealt with the claim as admitted by the Resolution Professional and reflected in the Information Memorandum. The claim filed by the Operational Creditor in Form B has been dealt with following the IBC and CIRP Regulation and the claim which was filed by the sub-contractor as an Operational Creditor cannot be treated to be a claim of workmen of the Corporate Debtor

Case Title: Amit Kumar Pandey & Ors. vs. Pardeep Kumar Sethi, Resolution Professional (JMT Auto Ltd.) and Ors.

Case No.: Company Appeal (AT) (Insolvency) No. 1364 of 2023

Counsel for the Appellants: Mr. Abhijit Sinha, Mr. Utkarsh Singh, Mr. Aditya Tripathi, Advocates.

Counsel for the Respondent: Mr. Krishnendu Datta, Sr. Advocate with Mr. Prateen Kumar, Ms. Raveena Rai, Ms. Smriti Nair, Advocates Mr. Anuj Tiwari, Mr. Swankit Nanda, Ms. Aroshi Pal, Advocates for RP.

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