Limitation extension and Section 9 preconditions barred disputed employee dues from being pursued through insolvency proceedings.

The tribunal treated the appeals as within limitation by applying the Supreme Court's Covid-19 extension of limitation. On the merits, it held that employee claims for unpaid salary and gratuity may fall within operational debt, but Section 9 relief was unavailable where no prior Section 8 demand notice had been issued in some cases, no specific date of default was shown, and the dues remained disputed or unsupported by acknowledgment. It reiterated that insolvency proceedings cannot be used as a recovery mechanism for stale or contested claims, and that the insolvency forum has no equity-based jurisdiction to grant such relief. The dismissal of the insolvency applications was affirmed.

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Issues: (i) Whether the appeals were barred by limitation. (ii) Whether unpaid salary and gratuity claims of employees could sustain applications under Section 9 of the Insolvency and Bankruptcy Code, 2016, including where the claims were disputed and no specific date of default was shown in part of the cases.

Issue (i): Whether the appeals were barred by limitation.

Analysis: The limitation objection was examined in the light of the Supreme Court's suo motu order extending limitation during the Covid-19 period. That order applied to proceedings across courts and tribunals and extended the period of limitation with effect from 15 March 2020. The appeals, though filed later, were treated as covered by that extension.

Conclusion: The appeals were held to be within limitation.

Issue (ii): Whether unpaid salary and gratuity claims of employees could sustain applications under Section 9 of the Insolvency and Bankruptcy Code, 2016, including where the claims were disputed and no specific date of default was shown in part of the cases.

Analysis: Employee claims were recognised as falling within the broad concept of operational debt in the Code, but the record showed that in some appeals no Section 8 demand notice had been issued before filing the Section 9 applications. The applications also did not disclose any specific date of default in the relevant particulars, and the record did not establish acknowledgment of dues from 2014 onwards. The Tribunal also distinguished the authorities relied upon by the appellants, holding that insolvency proceedings cannot be used as a recovery mechanism for disputed or stale claims and that the Tribunal had no equity-based jurisdiction to grant the relief sought. The claim for interest was left to be pursued, if so advised, before a competent forum.

Conclusion: The Section 9 applications were rightly dismissed.

Final Conclusion: The dismissal of the insolvency applications was affirmed and all the connected appeals failed.

Ratio Decidendi: A Section 9 insolvency application cannot be maintained to recover disputed or unsupported employee dues where the statutory preconditions are not satisfied, including proper notice and a discernible default, and the insolvency forum cannot be converted into a recovery court.

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