2021 (5) TMI 1040 - Tri - Insolvency and Bankruptcy

Tribunal Denies Applicants' Prayers, Directs Liquidator to Proceed with Asset Sale

Basavaraj Koujalagi and Ors. Versus Sumit Binani, Liquidator of Gujarat NRE Coke Limited

The Tribunal denied the applicants' prayers for regular payment of dues, injunction against closing the Dharwad plant, and restraining termination of the ... Direction to disburse payment of dues of workers and employees of the Company working at the Dharwad Plant of the company in Karnataka in a regular and timely manner - restraint on respondent/Liquidator by an order of injunction from taking any coercive steps for closing the operations of the company's plant at Dharwad, Karnataka - restraint on respondent/Liquidator by an order of injunction from terminating, or taking any decision to terminate, the agreement between the company and Jeju Metals Private Limited - appointment of competent and independent agency to investigate the manner in which the respondent/Liquidator has been conducting his affairs as such Liquidator. HELD THAT:- A contractual agreement between two corporate entities such as the Corporate Debtor and JMPL cannot be considered to be skewed in favour of any one party. It has necessarily to be treated as a contract between equals, and therefore, unless the contrary is proved, entered into without any undue influence, coercion, fraud or any other such element which would have vitiated the agreement. The parties to the contract, in such circumstances, should normally be held to their bargain - If JMPL thought that the termination of the contract was wrong, it has all the resources and the legal framework to challenge the same. The fact remains that this has not been done so far. An inference should, therefore, be drawn that JMPL was not aggrieved in any manner by the termination of the contract. Direction sought upon the liquidator to pay the dues of the workers and employees working at the Dharwad plant of the Company in a regular and timely manner - HELD THAT:- The liquidator has taken the decision to terminate the contract on 15.07.2020 from a commercial perspective, where the payments for April 2020 came to be paid in tranches till July 2020. The liquidator was not sure whether the payments for May, June and July 2020 would at all come, and therefore came to the conclusion to terminate the contract so that he could explore other options - it is a matter of conjecture whether JMPL would have come as the knight in shining armour to save the workers. Considering that no payments have come forth from JMPL after the termination of the contract, we are not too sure that this could have happened. Direction to restrain the liquidator from taking any coercive decision for closing down the operations of the Company's Dharwad plant - HELD THAT:- The prayer cannot be granted. It is for the Liquidator to take a call on whether to close down the operations of the Dharwad plant of the Company, as indeed for other units of the Corporate Debtor. In the order dated 11.01.2018, this Adjudicating Authority had specifically ordered the liquidator to try and dispose of the corporate debtor as a going concern within a maximum period of three months. For various reasons, this has not been possible for the liquidator. Appointment of competent and independent agency to investigate the manner in which the liquidator has been conducting his affairs as such liquidator, was not seriously argued by the learned counsel for the applicants - HELD THAT:- In the absence of any allegation of fraud or bias in the decisions of the liquidator, we cannot order a roving inquiry just on the basis of perceived loss of employment of the workers on account of a business decision taken by the liquidator to terminate the arrangement with JMPL. To hold otherwise will set a wrong precedent, and insolvency professionals shall not be able to take independent decisions, leading to a failure of the system. Such an approach should, therefore, be shunned. Actions taken in good faith by a public servant always enjoy protection under the law, and the IBC is no different, providing for the same under section 233 of the Code. Application dismissed. Issues Involved:1. Payment of dues to workers and employees.2. Injunction against closing operations of the Dharwad plant.3. Termination of the agreement with Jeju Metals Private Limited (JMPL).4. Appointment of an independent agency to investigate the conduct of the liquidator.Detailed Analysis:Issue 1: Payment of Dues to Workers and EmployeesThe applicants, employees of Gujarat NRE Coke Limited at the Dharwad plant, claimed non-payment of salaries and wages, especially during the COVID-19 pandemic. They argued that despite regular attendance and the liquidator receiving payments from JMPL, their dues were not settled. The liquidator contended that payments were made till September 2020, but cash flow issues limited further disbursements. The Tribunal found that the liquidator had made reasonable efforts to pay the workers, given the financial constraints of the company, and therefore, prayer (a) for regular and timely payment of dues could not be granted at this stage.Issue 2: Injunction Against Closing Operations of the Dharwad PlantThe applicants sought to restrain the liquidator from closing the Dharwad plant. The liquidator argued that the plant was commercially unviable, and continuing operations would exacerbate financial losses. The Tribunal noted that the liquidator had taken steps to keep the plant operational but found the unit unviable due to high expenses and low revenue. The Tribunal held that hard decisions, including closing unviable units, are necessary and aligned with the objectives of the Insolvency and Bankruptcy Code (IBC). Hence, prayer (b) to restrain the liquidator from closing the Dharwad plant was denied.Issue 3: Termination of the Agreement with JMPLThe applicants challenged the termination of the processing agreement with JMPL, arguing it was detrimental to the workers' interests. The liquidator justified the termination due to JMPL's failure to make timely payments and its financial instability. The Tribunal observed that the contract termination was a commercial decision within the liquidator's purview and noted that JMPL did not contest the termination. It concluded that the workers could not use their position to challenge the contract termination on behalf of JMPL. Thus, prayer (c) to restrain the liquidator from terminating the agreement with JMPL was not granted.Issue 4: Appointment of an Independent Agency to Investigate the Conduct of the LiquidatorThe applicants requested an investigation into the liquidator's conduct, alleging mismanagement. The liquidator defended his actions as being in good faith and within legal bounds. The Tribunal found no allegations of fraud or bias and emphasized that insolvency professionals must be able to make independent decisions without undue interference. Therefore, prayer (d) for appointing an independent agency to investigate the liquidator's conduct was dismissed.Conclusion:The Tribunal dismissed IA No. 865/KB/2020, directing the liquidator to proceed with the sale of the company's assets as per section 33 of the IBC, now that the stay on asset confirmation was lifted following the Supreme Court's final decision. The Registry was instructed to report further progress on 17.07.2021.