Workers' Claims For Layoff Period Dues Under Industrial Disputes Act Cannot Be Decided By Adjudicating Authority: NCLAT

Brief Facts

The CIRP of the Corporate Debtor commenced on 12.05.2022. The Corporate Debtor was an industry where notice for lay off was issued on 31.07.2021 for 45 days' layoff. Subsequently, after the notice, the work could not be resumed and the industry remained closed. after admission of the corporate debtor into insolvency, the workers' union filed claims to the tune of Rs. 314,31,360, of which Rs. 185,62,360 came to be admitted by the RP. The Adjudicating Authority passed an order by which it directed the RP to re-examine the claim within three weeks.

In pursuance of the said order, the Resolution Professional again examined and reaffirmed the earlier calculation of Rs.1,85,62,360/-. Aggrieved by the said decision, IA NO.406/2024 was filed by the Appellant, which was rejected by the impugned order.

Contentions:

The appellant while relying on section 25(m) and (o) of the Industrial Disputes Act submitted that the Adjudicating Authority erred in not appreciating the provisions of Industrial Dispute Act. the appellant submitted that since the lay off was illegal, the RP should have completely disregarded the same while calculating the salaries of the workers consequently their salaries till insolvency commencement date should be admitted.

Refuting the submissions, the respondent argued that the CIRP commenced on 12.05.2022 and it was open for the Appellant to challenge the layoff. Layoff having not been challenged by the Appellant, the Resolution Professional had to collate the claim and calculate the salary payment till date of layoff.

It was also argued that the issued raised in the present appeal is fully covered by judgment of this Tribunal in Era Labourer Union of Sidcul, Pant Nagar, through its Secretary Vs. Apex Buildsys Ltd.(2024). In the said judgment also both layoff as well as computation of salary was challenged before the Adjudicating Authority by means of an IA, which IA was not accepted and the salary was not computed after layoff period till initiation of insolvency.

In the above judgment, the NCLAT held 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.”

Observations:

The tribunal while agreeing with the submissions of the respondent observed that non-computation of salary after lay off by the Resolution Professional cannot be faulted with since the Resolution Professional has no adjudicatory jurisdiction and the Adjudicating Authority has rightly observed that whether the Workers are entitled to claim their dues for the layoff period under provisions of Industrial Dispute Act is not in the domain of the Adjudicating Authority. Reliance was placed on Era Labourer Union of Sidcul(supra) wherein the same question was considered by the NCLAT.

The tribunal concluded that “We, thus, do not find any error in the order passed by the Adjudicating Authority warranting any interference. We, however, make it clear that it shall be open for the Appellant to take such remedy as available in law.”

Case Title: Drish Shoes Workers Union Versus Drish Shoes Ltd.

Case Number:Company Appeal (AT) (Insolvency) No.2281 of 2024 & I.A. No.8501 of 2024

Judgment Date: 10/01/2025

For Appellant : Sr. Advocate Mr. ML Dhingra, with Advocates. Mr. Gaurav Dhingra, Mr. Govind Bhardwaj.

For Respondent : Mr. Abhishek Anand, Mr. Karan Kohli, Ms. Ridhima Mehrotra, Mr. Akshit Awasthi, Advocates.