Workmen Can Claim Dues After Layoff Only If They Continued To Work After Notice Was Issued By Corporate Debtor: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain, Justice Mohd Faiz Alam Khan and Mr. Indevar Pandey (Technical Member) has held that if the workmen or employees fail to prove that they actually worked after a layoff notice was issued by the corporate debtor, they are not entitled to claim any dues for the period after the layoff. Such dues can only be claimed if they continued to work despite the layoff notice. The present appeal has been filed under section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order passed by National Company Law Tribunal (NCLT) New Delhi by which an Interlocutory Application filed by Employee Union was dismissed. The Appellant submitted that the Resolution Professional of the Corporate Debtor (CD) has issued an order/notice of lay off on 01.02.2020 without clearing the legitimate dues of the employees and without following the due procedure as prescribed under relevant provisions of the Industrial Disputes Act and the said layoff notice is completely illegal and is violative of Section 25C, 25F and 25M of the Industrial Disputes Act, 1947 ('ID Act'). The Respondents submitted that there is no illegality in the impugned order as there was no work left to do at the factory of the CD. The Employees are not entitled to any dues when they did not work after the lay off notice. Furthermore, the NCLT lacked jurisdiction to decide the legality of the lay off notice. The Tribunal noted that in Era Labourer Union of Sidcul, Pant Nagar, through its Secretary vs. Apex Buildsys Ltd., the corporate debtor declared lockout and transferred its employees from one to another unit. The Employees filed their claims in the CIRP of the corporate debtor for the work they did during the lockout period and sought to declare the lockout notice illegal before the NCLT. The NCLAT held that the challenge to the lockout notice was not related to the CIRP and such challenges can only be made under the Industrial Disputes Act. The Adjudicating Authority is not empowered to entertain such challenges. It further relied on the Supreme Court's judgment in Sunil Kumar Jain & Ors. vs. Sundaresh Bhatt & Ors. (2022) where it was held that wages or salaries of Workers/Employees qualify as CIRP costs if it is proven that the Resolution Professional was managing the corporate debtor as a going concern and the workmen or employees worked during this period. Such dues must be paid in full first under section 53 of the IBC. It concluded that “the appellant workmen due to issuance of the layoff notice has not worked after issuance of this layoff notice and thus, in our considered opinion in view of the law mentioned therein before, they are/were not entitled for any dues, after the issuance of the layoff notice.” Accordingly, the present appeal was dismissed. Case Title: UNITECH MACHINES KARAMCHARI SANGH Versus Vivek Raheja and Ors. Case Number: Company Appeal (AT) (Insolvency) No. 1418 of 2023 Judgment Date: 16/09/2025 Click Here To Read/Download The Order

Workmen Can Claim Dues After Layoff Only If They Continued To Work After Notice Was Issued By Corporate Debtor: NCLAT

Mohd Malik Chauhan

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